Sanctions Are Exactly What Russia Needed.

Putin Couldn't Have Done It On His Own. Spasibo Biden!

As readers of Spoils of War should be well aware, I never thought sanctions would fulfill sanctioneers’ hopes and dreams of impeding Putin’s war in Ukraine and crushing the Russian economy. And so it has turned out. The Ruble, which Biden declared in March 2022 would soon be reduced to “rubble,” is trading at almost exactly the same level as when he made his boast. Inflation is moderate, the IMF predicts moderate economic growth next year, and so on.

So the Russian economy is clearly surviving in good enough health to enable Putin’s ongoing grinding of Ukraine to rubble. But economist James Galbraith, Lloyd M. Bentsen Jr. Chair in Government/Business Relations at the University of Texas, suggests that the draconian sanctions so proudly and confidently imposed by Biden and allies in the wake of the Ukraine invasion may have actually been of the greatest benefit to Russia, forcing structural reforms that Putin could not have imposed on his own. Galbraith has laid out his persuasive argument in a paper, The Gift of Sanctions: An Analysis of Assessments of the Russian Economy, 2022-2033. Citing exultant reports from Western commentators, including such panjandrums as Jeffrey Sonnenfeld of the Yale School of Management and senior Treasury official Dr. Emily Blanchard on the “devastating” effects of the sanctions, he examines the assumptions on which these assessments are based, and finds them severely wanting.

I caught up with Professor Galbraith a few days ago to discuss his report.