The target strikes back: explaining countersanctions and Russia’s strategy of differentiated retaliation

Abstract

This article analyzes Russia’s retaliatory food embargo, explaining why the Russian government banned some imports from the West but refrained from banning a range of equally plausible others. I argue that Moscow was following a strategy of differentiated retaliation when selecting which imports to embargo. The countersanctions were not designed to mete out equal punishment on all members of the sanctioning coalition. Rather, Russia purposefully crafted the policy to inflict greater economic damage on some states than others. Utilizing an original data-set on all agricultural and food products that Russia imports, I demonstrate that, ceteris paribus, imports of sizeable commercial value to countries the Kremlin has long viewed as the mainstays of anti-Russian policies were far more likely to have been banned. In contrast, the evidence shows that Moscow stayed its hand in dealing with Europe’s major powers. This analysis both illuminates the policy objectives being pursued by a leading actor in world politics, as well as lays the groundwork for theoretically understanding the geostrategic, political, and economic drivers of countersanctions.

Keywords:

• Russia
• countersanctions
• economic sanctions
• foreign economic policy
• trade

Notes

1. For example, in 2006, Russia embargoed imports of wine from Moldova and Georgia, as well as mineral water from the latter country. In July 2013, all chocolate, cake, cookie, and candy imports from Ukrainian confectionary company Roshen were prohibited from entering the Russian market.

2. See Decree No. 560 “On Application of Certain Special Economic Measures for the Purposes of Maintaining the National Security of the Russian Federation” of 6 August 2014, http://kremlin.ru/events/president/news/46404; and Government Decision No. 778 “On Measures for Implementation of the President’s Decree No. 560” of 7 August 2014, http://www.fas.gov.ru/legislativeacts/legislative-acts_51220.html.

3. These arguments share the focus on domestic actors’ policy preferences with other areas of IR research, for example, studies of trade policies. See, for example, Grossman and Helpman (2001).

4. See Strategiya Natsional’noi Bezopasnosti Rossiiskoi Federatsii do 2020 goda [National Security Strategy of the Russian Federation up to 2020], http://kremlin.ru/supplement/424; and Doktrina prodovol’stvennoi bezopasnosti Rossiiskoi Federatsii [Doctrine for the Food Security of the Russian Federation], http://www.kremlin.ru/events/president/news/6752.

5. The literature on the political determinants likewise suggests that states specifically shape trade patterns in order to trade more with allies and less with rivals (e.g. see Pollins 1989; Gowa 1994).

6. In light of the often discordant political relationship between Russia and Great Britain, the inclusion of the United Kingdom may warrant some caution. I include the U.K. alongside Germany, France, and Italy for several reasons. Irrespective of the ups and downs in intergovernmental relations, Russia traditionally has viewed the U.K. as a major player on the European and world stage, and, as noted by Monaghan (2013, 4), for example, has aspired to see “relations with the United Kingdom in the same positive, cooperative vein as relations with Germany, France and Italy.” Additionally, even when the U.K. and Russia have taken opposite sides on political issues, “business interests might be said to function as the glue that holds the relationship together, even when intergovernmental relations have come close to breaking” (David, Gower, and Haukkala 2013, 54).

7. Descriptive statistics for all the variables of interest and the controls is presented in Appendix Table A1.

8. To check the robustness of the main findings, I re-estimated all of the models using alternative measures for the main variables of interest. First, I used alternative measures for the Prior Protection and Alternative Supplier variables, with the Prior Protection variable constructed based on the average MFN tariff applied by Russia in 2001 rather than 2011, and Alternative Supplier as a continuous, rather than binary, variable measured in terms of the 2013 import share (%) of Russia’s largest trade partner for a given commodity, if the trade partner did not join the Western campaign of sanctions. Another set of estimates first excludes Sweden from the analysis, and then the U.K. Finally, another set of estimates excludes the two smallest Baltic countries, Estonia and Latvia, which, due to their small size, export significantly fewer products to the Russian market than either the other countries grouped in the Bêtes Noires category or Russia’s more “strategic” partners. This last test also, at least partially, addresses a potential concern that the results may be due to endogeneity introduced because some of the “bêtes noires” are small countries that are far more dependent on trade with Russia than the larger states. The 2013 combined commercial value of agricultural and food exports to Russia from the “bêtes noires” (excluding Estonia and Latvia) is comparable to the combined commercial value of exports from the “Big 4,” approximately $US 4.2 billion and $US 5.6 billion, respectively. The findings presented in the body of the article are highly robust to these re-estimations. In each case, the main variables of interest remain statistically significant, with the signs on all coefficients remaining unchanged. The results of the robustness tests are presented in Appendix Table A2.

9. In order to analyze whether specific country effects could be observed for each of the “Big 4,” I re-estimated the fully specified model (Model 5) to include dummy variables that take a value of “1” if Russia imports a product in any quantity from each of the four countries. The results of the regression analysis that treats the four countries individually, rather than as a group, are largely in line with the expectations generated by the differentiated retaliation argument. In the interest of space, I report the results in Appendix Table A3. The coefficients on the variables indicating imports from Germany, France, and Italy are negative, although statistically significant only the in the case of Germany. However, the positive, though not statistically significant, coefficient of the U.K. country dummy confounds expectations. Several interpretations of the finding are possible. First, several of the U.K.’s top exports to Russia in 2013, such as frozen fish and cheese, also are of hefty export value to countries such as Norway, Demark, and Poland, the states I have argued Russia was most keen to strike with its agricultural embargo. Alternatively, given Russia’s fraught recent history with Great Britain, it is possible that Russian political authorities chose to treat the U.K. with less circumspection than that accorded to Europe’s continental “Big 3.” Notably, however, Russia’s embargo did not affect trade in the commodity of greatest commercial value to the U.K., namely spirits such as whiskey, nor other top exports, such as beer and condiments and sauces.