MOSCOW – Last spring, after Russia annexed Crimea and began intervening in eastern Ukraine, the United States and the European Union introduced sanctions against Russian individuals and businesses. But if sanctions are to be an effective tool in countering Vladimir Putin’s ambitions – a topic of ongoing debate in the West – they must combine a firm hand toward Russia’s president with an open one toward its people.
To understand the role that sanctions can play in managing the Kremlin, one need only consider the importance of money to its occupant. From the beginning of the century until very recently, Russia was flooded with petrodollars; as the flow of money increased, so did Putin’s audacity and aggression.
In 1999, oil and gas revenues contributed $40.5 billion to Russia’s GDP. As prices rose and production increased, this contribution increased substantially, averaging $73.5 billion annually from 2001 to 2004. Russia’s growing wealth emboldened Putin, a change exemplified in his decision to arrest and imprison Mikhail Khodorkovsky, the owner of oil giant Yukos, in 2003.
And the trend continued. From 2005-2008, annual hydrocarbon revenues were $223.6 billion higher than in 1999; at the end of this period, Russia invaded Georgia. In 2011-2013, Russia’s annual oil and gas income peaked at $394 billion above 1999 levels, setting the stage for the Kremlin’s interventions in Ukraine. In all of these cases, Putin acted on the conviction that Russia’s oil wealth meant that rules – even international laws – did not apply to him.