Russia: When Sanctions Work and Don’t Work

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May 8 (Bloomberg) -- Peterson Institute Senior Fellow Gary Hufbauer discusses the impact of sanctions against Russia. he speaks on Bloomberg Television's "Bottom Line." (Source: Bloomberg)

Time.

Thanks.

When do sanctions work and when don't they work?

This is the case i would categorize as a military venture.

We have looked at some major cases in the last 100 years involving military ventures where a big target country was -- the attempt was to deter a big target country.

There are very few successes in this category.

What about the u.s. trying to -- one was the u.s. trying to deter britain and france from bidding suez in 1966, and that did succeed.

There are a few other cases of note that are successful.

I suppose the big reason is that when a country embarks on a military venture, as president putin has come a presumably he has calculated that sanctions will be imposed and he has taken that into account.

Certainly, president putin and his inner circle would have to know that one weapon to be used would be economic sanctions.

Was president putin not concerned about the impact sanctions could have on the russian economy?

I think he anticipated them at a certain level and i don't think the level of sanctions imposed so far has been above his threshold.

I doubt that he wants to trigger very heavy sanctions, such as have been imposed on iran.

He may go slow in his effort to nibble away at eastern ukraine, but i doubt he has given up the effort at this stage.

Talk to us about his power base.

Will those in his inner circle allow this to continue?

Glug he has two power bases.

One it -- he has two power bases.

One is the kgb.

Those people are dedicated loyalists.

They will not be deterred one way or another.

The other power base are the oligarchs, and the -- it is about 20 to 30 people who have a lot of wealth of their own and they hold a lot of putin's well.

They could be concerned.

But so far the russian stock market has only dropped by 15% and it has been up the last two days, yesterday and today.

This is not a crushing blow to these oligarchs, not yet.

But they would be concerned about sanctions that could cost them another 50% of their wealth.

I'm speaking with gary hofbauer, senior fellow at the peterson institute for international economics.

Ordinary russian citizens, are they caught in the middle?

Will sanctions cripple their economy to the point where they will suffer?

Sure.

They don't have any power, but they will suffer, and that is often the case with economic sanctions.

The imf has reduced its forecast of growth for the russian economy from about 3.5% to four percent at the end of last year to -0.1 5 -- -0.5% now.

That is not great for the russian people.

The economy there has been hurting for the past couple of years and this is more of the same.

But i don't think their voice is very strong.

We have about one minute left.

The west, as you know, has interest in russia.

Is it possible that sanctions could backfire?

How much of a reciprocal action by russia could hurt the west?

Russia stands to lose a much more than the west.

Russia does not have a big economy.

It is fragile.

But as to what you say, who will suffer from the backlash, there is a lot that prudent can do to -- that putin can do to hurt the west, in particular western europe.

It has about $200 billion of commerce with russia annually, and about $250 billion of investment in russia and all of that is at risk, and the western europeans know it.

That is why they are not to -- to enthusiastic about stiff sanctions.

Gary hofbauer, senior fellow

This text has been automatically generated. It may not be 100% accurate.

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