WHY THE BIPOLAR SYSTEM LIMITING THE EFFICACY OF THE U.S. SECURITY COALITION’S ECONOMIC SACTION ON RUSSIA: A NEOSTRUCTURAL REALISM PERSPECTIVE

Harri Fajri

doi:10.31315/jsdk.v17i1.12460

WHY THE BIPOLAR SYSTEM LIMITING THE EFFICACY OF THE U.S. SECURITY COALITION’S ECONOMIC SACTION ON RUSSIA: A NEOSTRUCTURAL REALISM PERSPECTIVE

Harri Fajri

Abstract

This article examines the efficacy of economic sanctions within the context of the 2022 Russian invasion of Ukraine. Traditionally viewed skeptically by scholars, economic sanctions were reconsidered in the 1980s as potentially effective. This study evaluates U.S.-led sanctions aimed at deterring the invasion and weakening Russia's economic and military capabilities. Despite these efforts, Russia's economy rebounded in 2023, and its military actions continued. The research explores why the bipolar system limits the impact of the U.S. security coalition’s economic sanctions on Russia’s economy and has not effectively reduced Russia’s power to wage war on Ukraine. By applying neostructural realism theory, the article argues that as a revisionist great power pursuing a unipole position, China ensures that the U.S.’ proxy war with Russia is long and costly by offsetting U.S. economic sanctions. China achieves this through increased imports of Russian oil and gas, using its financial payment system, and exporting machinery and semiconductors to Russia. This support sustains Russia's economy and military capacity, highlighting the limitations of economic statecraft in a bipolar world where major powers counterbalance each other's influence. The study underscores the need to reassess economic sanctions in contemporary geopolitical conflicts.

Keywords

Economic sanction, Bipolar system, Neostructural realism, Sanction busting.

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WHY THE BIPOLAR SYSTEM LIMITING THE EFFICACY OF THE U.S. SECURITY COALITION’S ECONOMIC SACTION ON RUSSIA: A NEOSTRUCTURAL REALISM PERSPECTIVE

Amri Hakim

Harri Fajri

Alexander Yandra

M. Ichsan Kabullah

ABSTRACT

Keywords: Economic sanction, Bipolar system, Neostructural realism, Sanction busting.

ABSTRAK

Artikel ini mengkaji efektivitas sanksi ekonomi dalam konteks invasi Rusia ke Ukraina pada tahun 2022. Sanksi ekonomi secara tradisional dipandang skeptis oleh para sarjana, terutama pada tahun 1960-an dan 1970-an, karena dianggap kurang efektif dibandingkan dengan instrumen militer. Namun, gelombang baru kajian pada tahun 1980-an menyarankan bahwa sanksi bisa menjadi alat yang efisien untuk mencapai tujuan politik. Studi ini mengevaluasi efektivitas sanksi yang dipimpin AS yang bertujuan untuk mencegah invasi dan melemahkan kemampuan ekonomi dan militer Rusia. Meskipun ada upaya ini, ekonomi Rusia pulih pada tahun 2023, dan aksi militernya terus berlanjut. Penelitian ini mengeksplorasi mengapa sistem bipolar membatasi dampak sanksi ekonomi koalisi keamanan AS terhadap ekonomi Rusia dan belum efektif mengurangi elemen kekuatan Rusia untuk berperang di Ukraina. Dengan menerapkan teori realisme neostruktural, artikel ini berpendapat bahwa sebagai kekuatan besar revisionis yang mengejar posisi unipol sebagai cara terbaik untuk bertahan, China memastikan bahwa perang proxy AS dengan Rusia berlangsung lama dan mahal dengan mengimbangi sanksi ekonomi AS. China mencapai ini melalui peningkatan impor minyak dan gas Rusia, menggunakan sistem pembayaran finansialnya, dan mengekspor mesin dan semikonduktor ke kompleks industri militer Rusia. Dukungan ini menopang ekonomi dan kapasitas militer Rusia, menyoroti keterbatasan kebijakan ekonomi dalam dunia bipolar di mana kekuatan besar saling menyeimbangkan pengaruh. Studi ini menekankan perlunya menilai kembali sanksi ekonomi dalam konflik geopolitik kontemporer.

Kata Kunci: Sanksi ekonomi, Sistem bipolar, Realisme neostruktural, Pelanggaran sanksi.

INTRODUCTION

Economic statecraft generally or sanctions especially don’t get any respect in foreign policy studies, during the 1960s and 1970s, although they are relatively inexpensive than military, scholars had reached consensus that they were not as effective as military instrument (Pape, 1997: 91). Even, some argued that they are applied not as a policy but a substitute for real policy (Kirshner, 2002: 160). But in 1980s, appeared the new hope that sanctions are often an efficient instrument for achieving important political goals (Pape, 1997: 91). Normand as one of the new wave scholars in 1996 argued in some cases sanctions were harmful as war itself (Majd, 2018: 177). Similarly, Elizabeth S. Rogers, based on 130 economic sanctions from 1914-1996 argued that sanctions are more successful at containing the spread of wars than at preventing the outbreak of both civil and international wars, followed by stopping or resolving such conflict (Rogers, 1996: 44-5).

Regarding Russia invasion on Ukraine 22 February 2022, there were two economic statecrafts used by U.S. and its coalition, which were economic deterrence by threatening that military actions will cost highly on Russia economy, and economic sanction as U.S. effort to use trade, investment, and financial deny to weakening Russia power in that war. Unfortunately, both U.S. economic statecraft have not reached the goals. U.S. economic deterrence was failed because of Russia kept invading Ukraine, meanwhile U.S. economic sanction does not work well because after grow for -1.2 percent in 2022, Russia economic growth rebound to 3.6 percent in 2023 and possibly 3.2 percent in 2024 which faster than all of advanced economies, in the meantime Russia’s attack seems pushed ahead (BBC.com, 2024; IMF, 2024).

Because the economic sanction is part of foreign policy which determined by structural constraint, then it is interesting to analyze the efficacy of economic sanction under this perspective. As Elizabeth Rogers argued that efficacy of sanctions require leadership by a great power, especially the only superpower (hegemon). U.S.-led sanctions after Cold War become effective because Soviet Union, who replaced target states’ lost trade and aid with their own (black knight), had been removed (Rogers, 1996: 44-5). It is also in line with Hufbauer’s argument that one of reason for sanction failure is the existence of the black knight, the wealthy allies of target country, who his support can largely offset whatever deprivation results from the sanction (Hufbauer et al., 2007: 8). Bryan Early also fall on the same conclusion that sanctions are less likely to be successful if the third parties provide assistance to sanctioned states (Bryan, 2009: 49).

The inquiry for this black knight has headed into the motivation of this sanction buster. Bryan Early in 2009 examined realism hypothesis “ if the third party state has a defensive pact with the target, it will be likely to become a sanctions buster, and if the third party is rival of the sender, then it also will more likely to become sanctions buster to weaken its adversary” and liberal hypothesis “ firms are constantly seeking to recognize and take advantage of the economic opportunities available to them “ found strong evidence for the liberal perspective, even a sender close allies’ firms are more likely sanctions-bust than other states (Bryan, 2009: 53-4).

In his next research 2011 based on 96 U.S. sanction episodes from 1950 to 2006, Bryan examined that politically motivated sanctions busters only have negative effect on sanctions success, meanwhile both commercially and politically sanctions buster motivation positively undermine the sanctions success (Bryan, 2011: 381). What literatures above have not explored and will be the questions for this article is the why does the bipolar system limiting the efficacy of the U.S. security coalition economic sanction on Russia to brake 2022 invasion?

ANALYTICAL FRAMEWORK

Conceptual approaches

Study of statecraft is to consider the instruments used by policy makers in their attempts to exercise power to get others do what they would not otherwise do (Baldwin, 2020: 7). This concept also include the target state defense strategy against instrument that been used by the sender (Armijo, 2019: 28). More than Morgenthau and Aron who just offered diplomacy and military as foreign policy instrument, Baldwin based on Lasswell’s model develops four instruments which are: propaganda refers to influence attempts relying primarily on the deliberate manipulation of verbal symbols; diplomacy refers to influence attempts relying primarily on negotiation; economic statecraft refers to all of economic means by which foreign policy makers might try to influence other international actors or influence attempts to international actors relying primarily on economic measures by state actors to achieve foreign policy goals (Baldwin, 2020: 39; Mastanduno, 2021: 65); military statecraft refers to influence attempts relying primarily on violence, weapons, or force (Baldwin, 2020: 12).

In order to operationalize this economic statecraft concept, Baldwin uses economic techniques of statecraft which synonym for him with economic sanctions (Baldwin, 2020: 35). He categorizes it as negative or positive sanctions. The former is attempts to threaten or punish on certain behavior, and the latter as attempts to promise or provide economic reward for certain behavior. Mastanduno, who also depart from this economic statecraft lying economic containment concept which operationalized as economic sanctions. He defines economic containment as an attempts to contain the expansion of an adversary’s military power both during hot war or cold war by using economic rather than political or military means (Mastanduno, 1985: 506). At this point, both prominent scholars who come from political science put economic sanction as the general terminology for economic statecraft.

The problem with economic sanction under this general terminology is it does not correspond with the commons definitions which emphasize on stopping misbehavior, such Cambridge Dictionary’s put sanction as an official order by stopping trade that is taken against a country in order to make it obey international law which is very liberal perspective. Economist also used economic sanction for this specific context that economic sanctions is the trade, investment, and financial deny to increase cost of economic activities such expensive import and shortage consumer and industrial input which end up with dampening competitiveness, productivity and economic growth that pressure target states into changing specified policies or modifying behavior in suggested directions (Jermano, 2018: 65; Tostensen & Bull, 2002: 374).

Although Baldwin said that it narrowly legalistic therefore unsuitable for general foreign policy analysis (Baldwin, 2020: 35), but it still could be work especially under realis perspective if we replace the phrase “obey international law” with “obey the sanction sender’s suggestion behavior” which is the essence of statecraft concept. The thing is when Baldwin and Mastanduno put sanctions in general terminology it will be difficult to operationalize this concept into specific phenomenon regarding timing and the level context. Like Mastanduno has shown that U.S. economic policy closely reflected with its relationship with Soviet Union. During 1950s and 1960s, economic warfare complemented the confrontational political approach, economic liberalization accompanied the detente approach in 1970-an, and after Afghanistan invasion U.S. going back to the former (Mastanduno, 1985: 517). By this U.S. economic statecraft periods we can see that U.S. détente policy is not intend to denies its economic relations with Soviet’ (economic sanctions) but to liberalizes it.

Regarding the overlapping concept above, neostructural realism (NSR) let it the way it is, the important things for NSR is what kind of political objective that need to be achieved and what is the pattern of economic instruments, as listed by Baldwin below, been used by the state men, also how effective it was. So, here the categorization of economic statecraft based on its political objective: economic deterrence is threatening that military actions will cost highly by imposing economic denial; economic détente is liberalizing trade, investment, and financial to relaxing political tension; economic hedging is strengthening economic cooperation while preparing for diplomatic and military confrontation, which usually practice by secondary powers or major and middle powers (Koga, 2018: 634). Economic containment is an attempt to prevent the redistribution of power element both of economic and military. And economic sanction as the trade, investment, and financial deny to increase cost of economic activities such expensive import and shortage consumer and industrial input which end up with dampening competitiveness, productivity and economic growth that pressure target states into changing specified policies or modifying behavior in suggested directions.

The next problem is come from Mastanduno’s definition about economic containment as containing the expansion of an adversary’s military power which rooted on realism perspective that emphasize power on military element (Berenskoetter, 2007: 6). As Mearsheimer said that great powers are determined largely on the basis of their relative military capability, so the balance of power is synonymous with the balance of military power (Mearsheimer, 2001: 55-6). Unfortunately, George Kennan whom referred by Mastanduno said that the fundamental objectives of our foreign policy must always be to protect the security of the nation, and to advance the welfare of its people (Gaddis, 2005: 26). The dissolution of Soviet Union also has taught neostructural realism a wisdom that the survival of state not only determined by military power element but also the economic one (Hough in Taylor, 2003: 17), By this perspective, economic containment mean as power elements containment as whole. This neostructural realism proposition is more looks like merchantilism perspective in international political economy studies that wealth and power are each proper ultimate ends of national policy, and international economy as an arena for imperialist expansion and national aggrandizement (Viner in Gilpin, 1987: 32).

The Strategies of Economic Statecraft

In order to operationalize his positive and negative sanctions, Baldwin offers economic techniques of statecraft such below:

Negative sanction strategies:

Trade Capital

Embargo Freezing assets

Boycott Controlling capital flow

Tariff increase Aid suspension

Quotas Expropriation

Blacklist Taxation

Dumping

Preclusive buying

Positive sanction strategies:

Trade Capital

Favorable tariffs Providing aids

Direct purchase Investment guarantees or encouragement

Export import subsidies Favorable taxation

Quotas

Blacklist

Dumping

Preclusive buying

Although, all of forms of economic statecraft such economic deterrence, sanction, containment, détente, and hedging are distinguished by political purposes, but their strategies can be like Baldwin offers above or like Mastanduno offers under its economic containment concept. Mastanduno who also has the same basic technique with Baldwin try to generalize it under three strategies which are: first, economic warfare which aims to weaken overall economy of the target that highly dependent on sanctioning state and at the same time unable to provide level of resource demanded domestically. Historically, there has been relationship between the levels of GNP with military expenditure, so it assumes that saving resources from trade can devoted for military capability improvement (Mastanduno, 1985: 507). One of the most exercised form of economic warfare which used by hegemon state is financial sanctions or knowing as financial statecraft (Armijo, 2019: 28). It relies on cooperation from banks and other financial institution to deny or restrict a targets ability to obtain financial service or capital. The next one is freezing elite’s overseas assets or blocking transactions, banning foreign investment in key economic sectors or curtailing access to capital markets and hard currency can threaten target’s firm liquidity, decrease productivity, and erode economic growth (Jermano, 2018: 65). This financial sanction especially flow of fund to and from a target has increased as U.S. foreign policy instrument than trade denial since 2000s because it efficiently targeting the government elites, minimize impact on civilian, by success rate 41 percent than trade sanctions for 25 percent (Majd, 2018: 175); second, strategic embargo. It is effort to block parts of direct and specific military utility to the target state that are military bottleneck regardless economic impact. According to contraband case, the separated product such as absolute and conditional contraband, also free goods was impractical in World War I and II, because all items in international trade even civilian goods could be considered serve military purpose (Mastanduno, 1985: 511-3). For a state employing a strategic embargo, trade which strengthens the target state economy is not necessarily detrimental to the security of sanctioning state (Mastanduno, 1985: 514); third, the tactical linkage. It seeks to manipulate trade relations in order to influence either the allocation of resources between military and civilian sectors in the target economy or willingness of the target government to use its military power (Mastanduno, 1985: 506). The sanctioning state assumes that its trade links are so important to the target state that the latter is willing to change its policies under the former’s desire (Mastanduno, 1985: 514). The economic aids or incentives can be categorized under this strategy.

On financial sanctions, the type of financial sanction which became popular recently is the access restriction on the international payments infrastructures and institutions which potentially disrupt every kind of cross-border economic activity requiring access to payment system, including tourism, remittances, foreign exchanges trading, and international trade financing. The most common communication network for international payment is maintained by the Society for Worldwide Interbank Financial Telecommunication (SWIFT) (Cipriani et al., 2023: 32). This infrastructure is critical component for governments, companies, and households to pay their international purchase of goods and services, or financial assets (Cipriani et al., 2023: 38).

Requirement and Indicators for Efficacy of Economic Statecraft

On those three strategies of economic containment above, Mastanduno then argues that only the strategic embargo is likely to be effective in influencing the Soviet’s military potentials. Economic warfare and tactical linkage have little chance of success and are likely to be frustrated by opposition from domestic interest groups and its allies, also response of adversary (Mastanduno, 1985: 529). If U.S. pursues economic warfare or tactical linkage along with a strategic embargo, it is likely to jeopardize the effectiveness of the latter. So, U.S. best only relies on strategic embargo (Mastanduno, 1985: 506). Mastanduno was on the same page with mainstream international politics scholars who did not give respect to economic sanctions. During the 1960s and 1970s, although economics sanction are relatively inexpensive than military one, scholars reach consensus that they were not as effective as military instrument (Pape, 1997: 91). Even, some argued that they are applied not as a policy but a substitute for real policy (Kirshner, 2002: 160).

But, In 1980s also appeared the new wave scholars who believe that sanctions are often an efficient instrument for achieving important political goals (Pape, 1997: 91). Normand as one of the new wave scholars in 1996 argued in some cases sanctions were harmful as war itself (Majd, 2018: 177). Similarly, Elizabeth S. Rogers, based on 130 economic sanctions from 1914-1996 argued that sanctions are more successful at containing the spread of wars than at preventing the outbreak of both civil and international wars, followed by stopping or resolving such conflict. As she noticed that sanctions were effective under some circumstances: first, sanctions require leadership by a great power, especially the only superpower (hegemon). In this case U.S.-led sanctions after Cold War could often help to prevent, contain, or resolve regional civil and interstate conflicts because Soviet Union, who replaced target states’ lost trade and aid with their own (black knight), had been removed; second, the sanctions are more effective when applied by all or nearly all of major states; third, if the sanctions were implemented forcefully they will succeed markedly (Felbermayr et al., 2021: 13; Rogers, 1996: 44-5), in this case, freezing assets is a strong measure, meanwhile cutting the bilateral aid is seldom inflict much harm; fourth, the broadest possible sanctions should be applied as early as possible in the conflict which also mean that partial or slowly tightened sanction should be avoided; fifth, sanction sender must clearly communicate what local actors have to do in order to avoid being sanctioned or to have the sanctions lifted; finally, the sanctions should be supported by strong hegemon’s rhetoric to persuade target state or parties that hegemon and its coalition have to resolve to maintain the sanctions until they are successful. Absence these measures sanctions will likely fail (Rogers, 1996: 44-7).

As complement for those requirements above, Mastanduno previously offers three constraints to achieve economic sanction objectives: first, it must placate or stifle domestic opposition from individuals or groups who believe their bear a disproportionate share of the burden of economic relations with the target state. The more protracted the attempt, the more difficult for government to ward off domestic opposition; second, it must obtain the cooperation of other states that are possible alternative source of supply and can thus nullify the economic impact; third, the containing government must consider the response of the target, because the target states are not equally vulnerable to it, the economic hardship does not necessarily produce the desire change in target’s political behavior (Mastanduno, 1985: 503-4). The constraints of economic sanctions above, at the end, will vis-a-vis with global economic situation and fear or perception of imminent danger from targeted state. Under global recession, economic warfare will be costly economically, meanwhile fear on imminent danger like suspecting Soviet Union was mobilizing for general war will prompt support from major allies (Mastanduno, 1985: 517-8). Finally, Jill Jermano furnish both Elizabeth and Mastanduno by adding assessment such as target vulnerabilities (bottleneck, and chokepoints) assessment, availability of leverage based on target reliance to the sender, orchestration with other tools, and potential obstacle and risk (Jermano, 2018: 65).

Table 1 Requirements and indicators for effective sanction

Requirements for success

Indicators

Domestically • Placating or stifling domestic opposition from individuals or groups who believe their bear a disproportionate share of the burden of economic relations

Internationally • Unipolar system

• Applied by all or nearly all of major states as possible alternative market or source of supply and can thus nullify the economic impact

• Global economic situation: under global recession, economic warfare will be costly economically

• Fear on imminent danger like suspecting Soviet Union was mobilizing for general war will prompt support from major allies

Tools • Assessing target vulnerabilities (bottleneck, and chokepoints)

• Freezing assets

• Cutting aids

Scale • Forcefully

• Partial or slowly tightened sanction should be avoided

Timing • Immediately

Communication • Sender must clearly communicate what action have to be avoided

• Supported by strong U.S. rhetoric that sender will maintain the sanctions until they are successful

Smart Sanction

The basic assumption of conventional sanction is the transmission mechanism that hardship inflicted on the civilian population of targeted state will lead to grassroots political pressure on the state’s decision maker to change their behavior. Under this approach the greater pain inflicted on the target state then the greater and quicker the gain for sanctioning state (Tostensen & Bull, 2002: 375). But because of conventional sanctions bring the broad negative impact, then in 1990s smart sanction has emerged to mitigate it (Daniel, 2011: 96).

Generally, there are two ways to differ this model from the conventional sanction, which are: first, it effectively target and penalize through arms embargo, financial sanctions, and travel restrictions the political elites (and their supportive constituencies) espousing policies and committing actions deemed reprehensible by international community or targeted sanctions focus on individual, entities, and transactions (Ahn & Ludema, 2017: 1); second, smart sanction protect vulnerable social groups such children, woman, and elderly from collateral damage, and avoiding specific commodities such food, and medical supplies (Tostensen & Bull, 2002: 373).

Sanctions process and assessing its efficacy

There are two approaches to understand of sanctions process: first, as an instrument of coercive diplomacy, and second as substitute for the use of military force. These approaches work through the bargaining theory that sanctions work by changing the cost-benefit calculations of the target that the target must obey the sender’s demands or suffer the consequences (Felbermayr et al., 2021: 3). Felbermayr who synthesizing economics and political approach to understand economic sanction process argues that understanding the sanction process requires inquiry the connections between political goals, economic policy, and economic effects (costs), between economic effects and political outcomes. For measuring the impact and the effectiveness of economic sanction, this article refers to Jermano’s definition that the impact is the actual effect of the sanctions on target economy, and effectiveness is the extent to which sanctions achieve policy goals (Jermano, 2018: 70).

Assessing the sanctions economic impact on targeted state is related to what kind of sanctions that have been taken. Under the conventional sanctions the indicators of impact are referring to standard economic performance indicators which consist of economic growth, GDP, fiscal and consumption expenditure, unemployment, inflation, exchange rate, and external trade (Ahn & Ludema, 2017: 6; Tuzova & Qayum, 2016: 140). Meanwhile under the smart sanctions the indicators that been used are totals asset, probability of bankruptcy, operating revenue and unemployment of targeted firms (Ahn & Ludema, 2017: 7&15, 2020: 1).

Because the conventional wisdom look the economic statecraft as useless or counterproductive by the successful rate between 30-35% (Felbermayr et al., 2021: 10), Baldwin offers that it should not base on one goal, look it as available option, and compare it with military or others instrument’s cost (Baldwin, 2020: xii-iv). To identify the policy goals we can rely on sanctioning state’s public statements, and supplemented by journalist and historian assessment (Hufbauer & Jung, 2020: 3).

METHOD

This research uses qualitative method which popularly known as grounded research, and basically based on an inductive way about relation theory and data. It is different with quantitative method which aims to examine theory, but qualitative research also and should role in testing theory. This method stressing on understanding social world through examination or interpretation of participant’s interpretation on their world by observations, documents, and interviews (Bryman, 2012: 379-384). The method of qualitative collecting data will be used in this research is library research by collecting reports, articles, news, video, and archive. This method is chosen because limitation of researcher to conduct observation and interview on the field. There are two categories of document: primary which come from official report or release, and the secondary documents through the scientific articles, news, publication, magazine, webpage, and book. In order to assess the quality of document, there are some questions that need to be answered: Authenticity: is evidence genuine or unquestionable? Credibility: is the evidence free from error and distortion? Representativeness: is it typical of its kind or is it the extent of typical? Meaning: is the evidence clear and comprehensible?

On interpreting data, there are three approach which can be opted: qualitative content analysis; semiotics; and hermeneutics (Bryman, 2012: 544). This research will use the first one, begin with searching out underlying themes in material, classifying the data and citing, triangulate it, arrange it in time line, and then verify into theory propositions.

Economic sanction is the trade, investment, and financial deny to increase cost of economic activities such expensive import and shortage consumer and industrial input which end up with dampening competitiveness, productivity and economic growth that pressure target states into changing specified policies or modifying behavior in suggested directions. As part of U.S. instrument foreign policy to stop Russia invasion on Ukraine, Washington uses several techniques such bellows:

Trade sanctions

Trade sanction is denying export from (boycott) and to (embargo) the targeted sanction. These instruments work effectively on target vulnerabilities. On the case of embargo, it started on February 24 2022, U.S. with its Global Export Control Coalition (GECC) restricts export on cutting-edge technology to Russia military such as software, semiconductor, telecommunication, encryption security, lasers, sensors, navigation, avionics, and maritime (Bureau of Industry and Security, 2022). As the bottleneck for Russia military industrial complex, the investigations found that Russia weapons system in Ukraine including the Kalibr cruise missile, the Kh-101 cruise missile and the Orlan-10 UAV use the U.S. technology such electronic integrated circuits (processors and controllers, memories, amplifiers), machine for reception, radio navigational aid apparatus, tantalum capacitors, and electrical parts of machinery which Moscow does not able to produce (FinCEN & BIS Joint Allert, 2023: 7). Because of these items contribute to Russia’s military capability to invade Ukraine, then, we can call it as a strategic embargo which defined as an effort to block parts of direct and specific military utility to the target state that are military bottleneck regardless economic and military impact.

On the boycott, regarding Russia’s primary export (60%) and source of revenue (39,9%) is oil and gas sector, then U.S. and its coalition restrict import on this product (Makarov in Coldal, 2023: 33). Since March 8, U.S. ban import of Russia crude oil, petroleum product, natural gas, and coal. U.S. together with G7 nations ban luxury goods to Russia, prohibited import of goods from several signature sectors of Russia economy- including seafood, vodka, non-industrial diamond- which represent over $1 billion import. It was also followed on March 10 by U.S. prohibition on Russia air craft/airlines, and vessels entering its airspace and ports (International Trade Administration, 2022). Due to the fact that Russia oil embargo creating the increasing price which contra-productive to its objective, then U.S. presenting oil cap price strategy by only allowing their insurance, shipping, and finance entities to serve Russian oil under $60 per barrel which reduce Kremlin’s tax revenue 40 percent in the first nine months of 2023 (U.S. Department of The Treasury, 2023a).

Financial sanctions

U.S. financial sanction stared by severing the connection to the U.S. financial system for Sberbank as the Russia’s largest financial institution which holds nearly one-third of the overall Russian banking sector’s assets, and heavily connected to the global financial system. By imposing correspondent and payable-through account sanctions, Sberbank will be restricted to access transaction which made in the dollar; full blocking on VTB Bank, Russia’ second largest financial institution, and three other major Russia financial institution, Bank Otkritie, Sovcombank OJSC, and Novikombank that freezing their assets touching U.S. financial system, and prohibit U.S. person make transaction with them; new debt and equity restriction on thirteen of the most critical Russian major state-owned enterprises and entities such as Gazprom, Transneft, Rostelecom, RusHydro, Alrosa, Sovcomflot, and Russian Railway. This sanction make these enterprises will not able raise money through U.S. market; freezing Russian elites and their family assets (The White House, 2022a). Another form of U.S. and its coalitions financial sanction on Russia was cutting $300 billion Russia Central Bank’s assets that make Russia government could not pay bills (U.S Department of State, 2022b).

The most crucial of U.S. financial sanctions to Russia is the access restriction on the international payments infrastructures and institutions which potentially disrupt every kind of cross-border economic activity requiring access to payment system, including tourism, remittances, foreign exchanges trading, and international trade financing. This infrastructure is critical component for governments, companies, and households to pay their international purchase of goods and services, or financial assets (Cipriani et al., 2023: 38). The most common communication network for international payment is maintained by the Society for Worldwide Interbank Financial Telecommunication (SWIFT) which established in 1973 by 239 Banks from 15 countries and headquartered in Belgium with its data center in U.S., Netherland and Switzerland (Cipriani et al., 2023: 32&43). German Finance Minister Christian Lindner and France Finance Minister Bruno Le Maire called this policy as financial nuclear weapon, because not only trade in goods or services, it will also covering tourism, remittances, foreign exchanges trading, and international trade financing (The Washington Post, 2022).

Because the key role of SWIFT is allowing its participants to exchange information through the SWIFT network then the sanction in this context is by prevent the target entities from accessing the network (Cipriani et al., 2023: 46). Even though SWIFT mainly tries not to make decision to exclude the users or restrict their access to the platform, but because the headquarter is in Belgium and U.S., Netherland, also Switzerland as its data center then the decision to deny some entities are forced by Belgium, European Union, and United States. In February 2012, under U.S. threat SWIFT discontinue access to Iranian financial institutions, and one month after that, under E.U. pressure SWIFT also did the same thing to Iranian bank including its central bank (Cipriani et al., 2023: 47). As impact of this SWIFT sanction in 2012, it was estimated that Iran loss approximately $60.4 billion or 16.2 of average annual real GDP billion, and total $241.73 billion since 2012-2015 (Majd, 2018: 186-7; Nolke, 2023: 148). In 2018, when United States withdrew from 2015 Iran nuclear deal, Washington again mandated SWIFT to re-sanctioning Iranian bank, even though E.U. did not withdrawn from that treaty which mean Brussel did not force SWIFT to re-sanction Iran, but SWIFT decided to complied Washington pressure to avoid U.S. sanction on SWIFT that could imposed a significant impact on global economy (Cipriani et al., 2023: 47-8).

At Crimea invasion 2014, because European Parliament only passed non-binding resolution urging E.U. members to deny Russia from SWIFT, but because it is only nonbinding SWIFT maintained its neutrality which mean it did not block Moscow from the network (Cipriani et al., 2023: 48). After the Russian 2022 invasion, European Union with U.S., Canada, Japan, U.K. mandate SWIFT to remove seven Russian and three Belarusian banks including their subsidiaries in March. By June, three more Russian and one Belarusian banks with their subsidiaries also enlist as sanctioned (Cipriani et al., 2023: 48).

Investment sanctions

On investment: on March 8, 2022, U.S. issued executive order prohibited new investment on Russia’s energy sector as its prime mover economy. It was followed by new executive order on March 11 which prohibits new investment in any sectors of Russian economy. And in order to give more pressure to Russia economy, on April 6, U.S. prohibits any investment in Russia by U.S. person (The White House, 2022b). This investment prohibition was hoped to slowing down Russia domestic production and creating the imbalance of Russia current payment.

DISCUSSION

The impact

The impact of economic sanction is the actual effect of the sanctions on target economy, which measured through economic growth, inflation, and government expenditure. For the economic growth, in 2022, first year of sanction, Russia’s economy grew for -1.2 percent. This declining was driven by 14 percent contraction in export and 11 percent in import (U.S. Department of The Treasury, 2023b). Unfortunately, in 2023 Russia economic growth was rebound to 3.6 percent, and like IMF forecast in 2024 possibly Russia will grow about 3.2 percent which faster than its sanctioning states (IMF, 2024). For the U.S. strategic embargo on cutting-edge technology to Russia military industrial complex such software, semiconductor, telecommunication, encryption security, lasers, sensors, navigation, avionics, and maritime, as reported by CSIS that at the first year of the war, Moscow had shortages on high-end foreign military component, while the import substitution strategy unable to covered it. As the consequence, it decreased Russia advanced weapons production (Snegovaya et al., 2024: 1). Unfortunately, because the nature of war from blitzkrieg which need sophisticated military technology has turned into attrition which need dual-use even civilian technology, then Russia’s demand on this U.S.’s component can be moved into Beijing supply where nearly all of the top exporters of microelectronics are based in China (Snegovaya et al., 2024: 19).

Unlike growth, U.S. economic sanction works a bit well in the inflation measure which escalates into 7.4 percent. It was driven by the depreciation of Rubel roughly 20 percent against Dollar from February 2022 to December 2023, and also the limitation of supply which come from import restriction (U.S. Department of The Treasury, 2023b). Finally. like economic growth, Russia government expenditure also does not much influenced by the sanctions, it was only oil and gas revenues which decrease from 11,586.2 bn RUB in 2022 to 8,822.3 in 2023, but in non-oil and gas category the revenue climbed from 16,238.2 into 20,301.8, even the total Russia government revenue was increase from 15,088.9 in 2022 to 19,454.4 bn RUB in 2023 (The Ministry of Finance of The Russian Federation, 2024). At this point, we can see that U.S. coalition’s economic sanction does not impact significantly on Russia economic and military element.

The effectiveness

The effectiveness of economic sanction is measured through to what extent the sanctions achieve policy goals. On the goals, at least there are two objectives that want to achieved by U.S: first, for short term U.S. intention is to stop Russia invasion, to reduce Russia strike capability in Ukraine. As U.S. Defense Secretary LIoyd Austin said in Poland that the goals of U.S.’ support for Ukraine is to maintain its sovereignty. (U.S Department of State, 2022a). This goal had achieved during the first 12 months of invasion where Russia experienced high losses from the failure to capture Kiev and Kharkiv even though still able to maintaining Sevastopol and Crimea (Snegovaya et al., 2024). Unfortunately, because this is an attrition war, then two years after the invasion, Russia’s power is back where it retakes the villages near Kharkiv. Second, for the long time, U.S. objective is to contained Russia as mentioned in Wolfowitz or Bush’s doctrine 1992 that U.S. will prevent the re-emergence of a new rival from the former Uni Soviet, it is also reflected on Austin statement that he want to see Russia weakened to the degree that it can’t do the kinds of things that it has done invading Ukraine (Hakim, 2023: 102). This objective could not be assessed in the short time, because at this moment as presented before that Russia economy growth faster than U.S. and its coalition states, but in the long term the lost access to international finance, investment and market (self-isolating), would stunt Russia economic, and in the meantime the high military expenditure, 6 percent of GDP (Snegovaya et al., 2024: 6), could make Russia’s fiscal collapse like Soviet Union was.

Bipolar system limiting the efficacy of sanctions

As the purpose of this article is to examine how the bipolar system limiting the efficacy of U.S. security coalition economic sanction on Russia, based on neostructural realism theory, there are some propositions which lead us to the argument which are: Anarchy makes states insecure and forces to help themselves to be survive by power struggling; On power struggling as the best way to survive, states seeking to be unipole (the only super power) or global hegemony by becoming regional hegemon without peer competitor in other regions; Even though a state is already achieved a unipole or hegemon position, it still aggressively and constantly struggling for power elements because the both are temporary position, which will be lost automatically as soon as lose its power gap through all of the great power. Unipole state (status quo) prevents other great power (revisionist) from balancing/exceeding its power elements by offset strategy, preventive war, and containment. The unipole state contains the revisionist state through establishing the regional balance of power elements, promoting the networked regions, and blocking the enemy’s influence instruments. As status quo contain the revisionist state, then the latter will face it by weakening the status quo through provoking a long and costly war with its enemy (bait and bleed), also ensuring that status quo’s war is protracted and deadly (bloodletting).

At this 21st century, precisely in 2018, international international system entering the bipolar world, where China’s military and economic element score reached about 50.6 percent to U.S., meanwhile Russia only at 8.5% (Hakim, 2023: 105). Due to propositions that status quo unipole contains the revisionist state through establishing the regional balance of power elements, promoting the networked regions, and blocking the enemy’s influence instruments then as we can see where U.S. has been already launching Indo-Pacific strategy to contain China power elements’ rise since 2019 (Hakim, 2021: 47&73). As strategies against U.S. containment, China has been securing nuclear deterrence, racing in military innovation, even offsetting Washington in hypersonic missile (Hakim, 2021: 43). Another China’s strategy against U.S. was bloodletting, due to U.S. proxy war with Russia, where China will make sure that this war will be long and costly by busting U.S. coalition economic sanction impact on Russia as described before.

In order to neutralize U.S. coalition embargo on Russia oil and gas, As Russia natural gas supplies to Europe went down 55.6 percent in 2023 Beijing increasing 50 percent its import from Russia through Siberian power pipeline. Beijing also doubled its liquified petroleum gas import from Russia in 2022 than 2021. China import on Russia’s crude oil also increased about 25 percent from 1.65 to 2 million barrels per day, overtaking India as largest buyer of Russia’s crude oil (Office of the Director of National Intelligence, 2023: 4). Both China and India increasing its crude oil import approximately 70 percent in November 2022 replacing export to E.U. which fall also almost 70 percent (European Central Bank, 2023). Regarding U.S. coalition’s price cap sanction did not allow their transport Russia’s oil under $60 per barrel, China evaded it by providing insurance cover and 18 super tanker plus 16 Aframax-sized vessel which able to transport 15 million tons crude oil (Office of the Director of National Intelligence, 2023: 14).

For the strategic embargo to Russia military industrial complex where global export semiconductor to Russia and Belarus decreased about 54 percent in 2022, China’s semiconductor export to Russia increased by 19 percent between January and September 2022 (Office of the Director of National Intelligence, 2023: 5). On machine industry, as the most significant busting, China export to Russia jumped to 32 percent in 2022 and to 80-90 percent in 2023 (Snegovaya et al., 2024: 21).

Finally, on financial sanctions, China facilitating its trade with Russia by using Yuan, and its own payment system, Cross Border Interbank Payment System (CIPS), which built in 2015 to facilitate renminbi for international transactions (Cipriani et al., 2023: 41), following Russia’s mitigation strategy right after 2014 Crimean annexation Russia where U.S. and E.U. threatened to cut Moscow from SWIFT (Verhagen et al., 2020: 9).

CONCLUSION

This article arrives from the assumption that the economic sanction is a part of foreign policy which determined by structural constraint. Then it is interesting to analyze the efficacy of economic sanction under this perspective. The conventional wisdom about the effectiveness of economic sanction under this perspective is the efficacy of sanctions require leadership by a great power, especially the only superpower. Due to the dynamics of bipolar system in this 21st century while U.S. and China struggling for unipole position, we are also shown by the fact that U.S. economic deterrence and economic sanction on Moscow do not work well to prevent and stop its invasion. As the continuity structural perspective above this article which uses neostructural realism theory intend to develops this conventional wisdom in the bipolar system by asking question: why does the bipolar system limiting the efficacy of the U.S. security coalition economic sanction on Russia to stop 2022 invasion? As the result founded that anarchy makes states insecure and forces to help themselves to be survive by power struggling to be the unipole. Because of unipole is temporary position then U.S. aggressively and constantly struggling for power elements by containing China as revisionist great power. As strategy to counter U.S. containment policy, China ensuring that U.S.’ proxy war with Russia is protracted and deadly by busting its economic sanctions through increasing import of Russia’s oil and gas, using China’s financial payment system, exporting machine production, and semiconductor for Russia military industrial complex which effectively limiting the efficacy of U.S. security coalition economic sanction.

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DOI: https://doi.org/10.31315/jsdk.v17i1.12460

DOI (PDF): https://doi.org/10.31315/jsdk.v17i1.12460.g6786

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