Why Are We Surprised That Sanctions Keep Failing?

Russia's attack on Ukraine came in the face of stern warnings and escalating economic sanctions from world leaders, including steps to tighten the screws on the country's debt and access to funding in international markets. While the U.S. and its allies can do more to cut Russia off the global financial system, preventing or waging a war via markets is once again proving a blunt instrument.

Among the measures that President Joe Biden announced days ahead of the attack on Ukraine was a move to sanction Russian sovereign debt. U.S. investors — who were already barred from buying Russian government bonds in the primary market — can no longer trade newly issued securities in the secondary market. Europe followed suit with similar action. As my Bloomberg Opinion colleagues Marcus Ashworth and Brian Chappatta have said, shutting access to secondary bond markets would squeeze Moscow financially far more than any other sanctions attempted in the past. Indeed, about a third of the country's sovereign debt value has been wiped out, with trading drying up amid a surge in yields and UBS Group AG triggering margin calls by cutting the value of Russian debt held as collateral to zero. More severe action, including kicking Russia out of the SWIFT global financial messaging platform for international payments, would further cripple the country's economy, exports and standing in global markets.