Why Western Policy Makers Should Worry About Sanctions Inoculation
Agathe Demarais
In 1796 the British scientist Edward Jenner had a seemingly outlandish theory: he believed that catching mild cowpox rendered one immune to deadly smallpox. Jenner did not shy away from testing his assumption. He exposed an eight-year-old boy to cowpox scabs before putting him in contact with strains of smallpox. The child was fine. The earlier inoculation with benign cowpox had helped him build protective antibodies against fatal smallpox.
As the United States and its allies double down on imposing sanctions against Russia, Iran, and other proud members of the international coalition of the rogues, Jenner’s experiments have an intriguing application in the field of economic statecraft. Like human beings, large economies that are exposed to mild sanctions appear able to brush their effects away and to build antibodies against tougher economic measures—a process that could be called sanctions inoculation. A couple of Russia-related sanctions illustrate how this process works in practice.
In doing so, these financial institutions illustrated how mild, cowpox-like sanctions are unlikely to inflict much damage on their targets.
Take the G7 decision to cut the access of some Russian banks to Swift, the global rolodex of financial institutions. Disconnecting all Russian financial institutions from Swift was not a viable option for Western policy makers: in such a scenario, Moscow’s exports of grains and other commodities to developing economies would have been severely disrupted. This was not a desirable outcome: such a situation would have given credence to Russian bogus claims that sanctions fuel global food insecurity.
Western allies decided to go for a milder measure: they cut off the access of only seven Russian banks to the Swift network. In the short term, the measure had a limited impact on Moscow: Russian firms simply rerouted cross-border transactions through one of the several hundreds of unaffected Russian banks. In doing so, these financial institutions illustrated how mild, cowpox-like sanctions are unlikely to inflict much damage on their targets.
In doing so, they built antibodies against a potential disconnection of all Russian banks from Swift.
In the long run, the measure may have been counterproductive. Following the de-Swifting of seven of their competitors, Russian banks doubled down on efforts to connect to CIPS, the Chinese alternative to Swift. In doing so, they built antibodies against a potential disconnection of all Russian banks from Swift. Cutting off the access of only seven Russian banks from Swift was thus a Western own goal; it probably boosted efforts from the entire Russian banking sector to protect itself from a full de-Swifting.
The G7-EU price cap on Russian oil exports provides another illustration of how sanctions inoculation can help rogue countries acquire long-term sanctions immunity. The measure imposes a US$60/barrel price cap on Russian oil exports that are facilitated by insurance or shipping firms based in G7-EU countries. On paper, the policy should have dealt the Kremlin a huge blow. Before the invasion of Ukraine, ships that had ties to G7-EU economies carried around 80 percent of Russian seaborne oil shipments.
In the long run, the measure may have been counterproductive.
Yet this seemingly logical reasoning had a flaw. It eclipsed the possibility that the Kremlin would seek to adapt to the price cap and build long-term protection against measures targeting Russian energy exports. Moscow did so with gusto, assembling a vast fleet of old tankers that had zero ties to G7-EU economies. Such sanctions-immune ships now carry around 90 percent of Russian seaborne crude exports, making these shipments out of reach of the G7-EU price cap and many of its potential variations.
Moscow’s ability to dodge the oil price cap should not have come as a surprise. In 2020 the Kremlin had assembled a similarly sanctions-proof fleet of vessels to build the Nord Stream 2 gas pipeline despite US sanctions. To avoid inoculation, G7-EU allies would have needed to make the price cap much more stringent from its onset: requiring that Russian vessels display proof of Western insurance to transit via EU maritime chokepoints would have dented Russia’s ability to adapt to the measure, for instance.
Both examples highlight how Western countries can inadvertently help their targets build sanctions immunity through sanctions inoculation.
Both examples highlight how Western countries can inadvertently help their targets build sanctions immunity through sanctions inoculation. When G7 allies apply the usual sanctions-escalation playbook and do not go for powerful measures immediately, their targets may incur only temporary economic damage. After a period of adaptation, these countries can brush away the effect of such mild sanctions and develop long-term protection against tougher ones.
Looking ahead, the sanctions inoculation concept will have important long-term implications for Western policy makers. As they target larger and larger economies that have access to vast resources to adapt to sanctions, Western allies could soon face a new challenge: sanctions escalation may well become counterproductive. Considering China’s recent military maneuvers around Taiwan, this may be an important lesson to keep in mind for future sanctions packages against large economies.
Agathe Demarais is senior policy fellow at the European Council on Foreign Relations (ECFR) and the author of Backfire: How Sanctions Reshape the World Against U.S. Interests.