Global governance centre
14 March 2017

Sanctions on Russia: what economic impact for the US?

A new report published by the Graduate Institute’s Programme for the Study of International Governance (PSIG) suggests that economic costs to the US of its sanctions on Russia are minimal and should not represent a major consideration in the US government’s decision-making as to whether to maintain or lift the measures.

A new report from the Graduate Institute’s Programme for the Study of International Governance (PSIG) investigates the impacts and economic costs to the United States of its sanctions on Russia, imposed since 2014 following the crisis in Ukraine. Commissioned by Rasmussen Global, Sanctions on Russia: Impacts and costs for the US uses trade statistics, specialist literature, and interviews with officials to assess economic costs at the national, sectoral, state and firm levels, as well as in relation to investments, and considers the strategic implications of lifting sanctions.

Lead author, Dr. Erica Moret, Senior Researcher at PSIG and Coordinator of the Geneva International Sanctions Network, said the report reveals that “the US economy is not dependent on, or sensitive to, the situation in Russia or sanctions in place. The economic costs of sanctions to the US are therefore minimal and should not represent a major consideration in government decision-making on whether to maintain or lift the measures.”

“In 2014, Russia ranked 22nd among the US’ main trade partners and trade volume in goods and services represented less than 1% of total US trade with the world. US trade with Russia is likely to have contracted regardless of sanctions, as the Russian economy began to slow three years before measures were imposed, in light of the fall in the global oil price, the Russian recession and depreciation of the rouble.”

Dr Moret noted that “comparatively, economic costs from sanctions have been substantially larger for the EU than for the US, given the EU’s greater overall trade volume share with Russia. While the US suffered a decline of 0.24% in its export share to Russia relative to total exports between 2013-15, the EU average decline was 2.8%. Due to these disproportional effects, there is a heightened need for ongoing close coordination between the US and the EU regarding next steps on Russia sanctions.”

The report also highlights how sanctions have been instrumental in signalling the consequences of violating international norms on territorial integrity, and raising the costs of Russian actions in the conflict. It concludes that “a change in US policy on Russia sanctions, taken in the absence of a political settlement based on the Minsk Agreements, could have far-reaching strategic implications”, including for “Russia-West relations, the transatlantic partnership, and global peace and stability”.

This report follows the October 2016 publication of The New Deterrent? International Sanctions against Russia over the Ukraine Crisis.

Download the full report.