There is a large literature on the rationale and impacts of the imposition of economic sanctions. Such sanctions are implemented in an effort to persuade the political and sometimes business leadership of a country to alter its policies (Dizaji and van Bergeijk 2013, Bělín and Hanousek 2019, Felbermayr et al. 2021, Cecchetti and Berner 2022). Until Russia’s annexation of Crimea and subsequent invasion into Ukraine, most punitive measures took the form of trade sanctions, investment sanctions, or sectoral measures. These types of sanctions have been extensively evaluated (e.g. Lastauskas et al. 2023).
There is, however, little scholarship about sanctions on individual businesspeople, as these have only become a feature of recent punitive mechanisms. One exception is Djankov and Su (2024), which studies the imposition of individual sanctions under the United States Magnitsky Act. Two somewhat relevant studies are Keerati (2022) and Nigmatulina (2022), which investigate the effects of sanctions imposed by the US and EU on specific Russian firms following Russia’s annexation of Crimea in 2014 and find that these firms have increased their operations due to a reallocation of government procurement towards them, in the process further enriching their often-sanctioned owners.
In this column, we study the correlates of sanction imposition among the 200 richest Russian businesspeople at the onset of the invasion in February 2022. In particular, each individual from the “200 Richest Businessmen of Russia” ranking from Forbes for December 2021 was cross-referenced against the sanctions database OpenSanctions, with data current as of 30 October 2024. The analysis focused on individual sanctions imposed by the EU, the UK, or the US. For sanctions imposed by the US government, both the Specially Designated Nationals List and the Consolidated List were considered, as these have different underlying motivations. Additional data on sanctions imposed by Australia, Canada, Japan, New Zealand, and Poland (the latter in cases where no EU sanctions were imposed) were also collected and the subject of our study.
We are able to capture the intentions of the sanctioning authorities with only a parsimonious set of variables. Our analysis implies that an algorithm based on public information could be used to draft lists of sanctionable individuals. This algorithm, however, presents an exit problem: how policymakers would decide which sanctions to lift once Ukraine wins the war. This research suggests that other variables, for example the probability to enhance the democratic transition in a post-Putin Russia, may have to be considered too.
In performing this research, we uncover a significant gap in the literature. There is virtually no research on the effects of lifting any kind of economic sanctions. There are several examples of such multilateral or unilateral removals of sanctions. Following the fall of Saddam Hussein’s regime, in 2003 the United Nations lifted most of the sanctions that had been imposed on Iraq since the 1990 invasion of Kuwait. In 2013, the EU lifted most of its economic sanctions on Myanmar in response to political reforms and the release of political prisoners. In 2014, the US began normalising relations with Cuba, leading to the easing of some economic sanctions. This included lifting restrictions on travel, remittances, and certain types of trade. In 2017, the US lifted some of its economic sanctions on Sudan, citing improvements in human rights and counter-terrorism cooperation. How these reversals of sanctions affected the targeted country’s economy remains an open question.
Correlates of being sanctioned
We construct several explanatory variables to investigate the correlates of being sanctioned as an individual after Russia’s invasion of Ukraine in 2022 (Djankov and Golovchenko 2024). This data construction uses publicly available data and focuses on the 200 richest Russian businesspeople at the onset of the invasion. Individual sanctions have also affected thousands of politicians, administrators, and judges in Russia. The correlates of these individuals’ sanctions are difficult to construct, as many of the sanctioned individuals are not well-known public figures, and hence lie beyond our focus.
The seven explanatory variables we choose are binary in nature: the individual businessperson ranks among the 50 richest Russians; has emigrated from Russia prior to the invasion; he/she has significant investments in western economies; operates in strategic Russian industries such as energy (oil, gas, electricity), metals and mining, defence, finance, and telecommunications; has political proximity to the Kremlin; appears frequently in government-run media sources (Russian state-owned newspapers, TV channels, radio stations, online news sites); and has publicly spoken out against the war in Ukraine.
Among these variables, proximity to the Kremlin is the most difficult to construct. Using our previous research (Djankov 2015), we posit that an individual has close connections to the Kremlin if appointed or elected to a public position, for example in the State Duma, at the Federation Council, or as regional governor or high-level regional administrator; or if such an individual has close professional connections to President Putin dating back to his KGB days, his early government career in St. Petersburg, or his sports career. Direct family ties are also considered (for example, Putin’s former son-in-law). Businesspeople who have received the highest state honours given personally by President Putin are also included in this list.
Some descriptive statistics provide texture to the choice of explanatory variables. Seventy of the top 200 Russian businesspeople have been sanctioned by either the EU, the UK or the US. A further six have been sanctioned by Australia, Canada, Japan, or New Zealand, and another five by Poland. Sanctions are concentrated among the wealthiest Russian businesspeople, with 34 of the top 50 (68%) facing sanctions.
Among the top 200 richest Russians, 54 (27%) had emigrated prior to the invasion, 110 (55%) have significant Western investments, 90 (45%) operate in strategic industries, 45 (22.5%) have proximity to the Kremlin, 41 (20.5%) frequently appear in government-run media, and only 27 (13.5%) have publicly spoken out against the war in Ukraine.
We use univariate analysis to show which characteristics of a businessperson’s life are most correlated with the imposition of sanctions by either the EU, the UK, or the US. Proximity to the Kremlin increases the odds of being sanctioned by 26 times. Being in the top 50 richest list increases the odds of sanctions ninefold. Involvement in strategic industries increases the odds of sanctions sevenfold. Having emigrated decreases the odds of being sanctioned by 79%. Other features – including public opposition to the war, having Western investments, or official media exposure – do not show statistically significant relationships with the imposition of sanctions (Figure 1).
When we look at sanctions by other countries (Canada, Australia, Japan, and New Zealand), public opposition to the war is associated with increased odds of sanctions. This counterintuitive finding may stem from the increased visibility of individuals, making them more likely targets for sanctions. More intuitively, however, the relationship goes in the opposite direction: such individuals understand that they are likely to face sanctions and try to pre-empt their imposition by voicing their opposition to the war.
Figure 1 Odds ratios for sanctions on 200 richest Russians
Note: * Statistically significant at 1% level.
Source: Djankov and Golovchenko (2024).
Six Russian businesspeople were sanctioned by Canada, Australia, Japan, or New Zealand only. The sanctioning of this subset of individuals reveals a difference in sanction approaches by the governments of this quartet of countries: five out of the six individuals have significant investments in the sanctioning country, a factor not statistically significant in previous analyses.
As a final test, we stack all explanatory variables into a single multivariate analysis and find that proximity to the Kremlin remains the strongest predictor, increasing the odds of being sanctioned by 23.7 times. Involvement in strategic industries significantly increases the odds of sanctions by 7.7 times. Being in the top 50 richest list increases the odds of sanctions by 6.4 times. Emigration status is more significant than in univariate previous models, decreasing the odds of being sanctioned in half. War opposition, Western investments, and official media exposure do not show statistically significant relationships with the imposition of sanctions.
Interpretation
Most previous studies find that Russia’s economy appears to have withered the imposition of a battery of economic sanctions on the back of large war-time fiscal stimulus and increased revenues from oil and gas exports (e.g. Ribakova 2024). Still, Russia has experienced much weaker growth compared with other commodity exporters and is facing uncertain medium-term prospects (Gorodnichenko et al. 2024). The relative importance of individuals’ sanctions in these outcomes is a worthy research topic, especially as it affects their ability to invest in new businesses.
A second research question is whether sanctions on individuals have caused a change in the course of Russia’s war in Ukraine. More likely than not, some of the targeted individuals have tried to serve as intermediaries in softening Russia’s stance. The evidence is not sufficient to suggest such intermediation has been successful. As previous studies show, sanctions are a last-resort measure to ameliorate international conflicts or domestic human rights violations (Cecchetti and Berner 2022). The effectiveness of sanctions in other contexts, such as North Korea, Iran, Cuba, and Venezuela, suggests that while they may not always lead to immediate regime change or major policy shifts, they do play crucial role in containment (Itskhoki and Ribakova 2024). The impact of individuals’ sanctions on Russia’s war effort should therefore be assessed in light of longer-term effects and in particular in the finding of an end to military hostilities.
Beyond the establishment of peace, another goal of sanctions is mentioned in previous research. At the onset of Western sanctions on Russian individuals, there was a debate over whether sanctioning wealthy Russians, especially those who have professed a transition to Western values by emigrating abroad and investing outside Russia, would retard the evolution of the country into a democratic state after the demise of the Putin regime (Galbraith 2024, McGlynn 2024, Tikhonova 2023). As part of this discourse, public comments against the war were encouraged to differentiate among members of the business elite (Chotiner 2023, Burrows 2023). Our analysis suggests that such differentiation was absent in the imposition of sanctions. Instead, sanctions were imposed using criteria that were readily apparent in the past behaviour of sanctioned individuals. Such across-the-board targeting raises questions about the algorithm for the rollback of individuals’ sanctions once Ukraine wins the war.
References
Bělín, M and J Hanousek (2019), “Making sanctions bite: The EU–Russian sanctions of 2014”, VoxEU.org, 29 April.
Burrows, E. (2023), “The West has sanctioned Russia’s rich. But is that really punishing Putin and helping Ukraine?” AP News, 6 December.
Cecchetti, S and R Berner (2022), “Russian sanctions: Some questions and answers”, VoxEU.org, 21 March.
Chotiner, I (2023), “Why Russian Élites Think Putin’s War Is Doomed to Fail”, The New Yorker, 3 May.
Dizaji, S F and P A G van Bergeijk (2013), “Could Iranian sanctions work? ‘yes’ and ‘no’, but not ‘perhaps’”, VoxEU.org, 1 June.
Djankov, S (2015), “Russia’s Economy under Putin: From Crony Capitalism to State Capitalism”, Peterson Institute for International Economics, Policy Brief 15-18, September.
Djankov, S. and A. Golovchenko (2024), “Who Fell under Individuals’ Sanctions After Russia’s Invasion of Ukraine”, London School of Economics, Financial Markets Group, Discussion Paper 922.
Djankov, S and M. Su (2024), “Are U.S. sanctions off-target: Evidence from the Magnitsky act”, Economics Letters 242(C).
Felbermayr, G, A Kirilakha, C Syropoulos, E Yalcin and Y Yotov (2021), “The ‘Global Sanctions Data Base’”, VoxEU.org, 18 May.
Galbraith, J K (2024), “The gift of sanctions: an analysis of assessments of the Russian economy, 2022–2023,” Review of Keynesian Economics 12(3): 408-422.
Gorodnichenko, Y, I Korhonen, and E. Ribakova (2024), “Russian Economy on War Footing: A New Reality Financed by Commodity Exports”, CEPR Policy Insight 131.
Itskhoki, O and E Ribakova (2024), “The Economics of Sanctions: From Theory into Practice”, BPEA Conference Draft, 26-27 September, Washington DC.
Keerati, R (2022), “The Unintended Consequences of Financial Sanctions”, Working Paper. Rochester, NY.
Lastauskas, P, A Proškutė, A Zaldokas, M Juust and J Berzins (2023), “How firms adjust to economic sanctions”, VoxEU.org, 17 April.
Nigmatulina, D (2022), “How US sanctions increased the economic activity of sanctioned Russian firms”, VoxEU.org, 19 November.
McGlynn, J (2024), “Who Cracks First? The Russian Elites or the Russian People?”, in S Šrāders and G S Terry (eds), The Paradox of Power: Ukraine’s Struggle, Russia’s Dilemmas, and Global Consequences, Baltic Defence College.
Ribakova, E (2024), “Russia’s New Economy May End up Prolonging Its War”, Financial Times, 2 May.
Tikhonova, N (2023), “Worldview Specifics of Supporters of the Western Path of Development for Russia in Mass Population Strata“, Social Sciences 54(4).