A Watershed Moment for Sanctions? Russia, Ukraine, and the Economic Battlefield

Russia's invasion of Ukraine has triggered an unprecedented wave of sanctions targeting every facet of the Russian economy. In the early months of the conflict, the sheer scope, speed, and coordination of this response to Russia's aggression instills hope that economic pressure may yet play a decisive role in this conflict. But the massive scale of the effort is also cause for concern. In particular, it highlights the relative lack of legal constraints governing economic warfare, even in the face of potentially grave harms to third parties and the global economy. While these concerns have provoked no shortage of proposals for reform, the fragmented institutional landscape and a lack of political will are likely to frustrate any attempts at far-reaching transformation.

The second category of measures targets the Russian financial system. This includes blocking sanctions against major Russian banks and financial institutions, limitations on transactions with others, and the removal of certain financial institutions from the Swift financial messaging system. Importantly, the United States and the European Union have banned all transactions with the Central Bank of the Russian Federation. This measure is designed to prevent Russia from undermining the impact of sanctions by accessing its sizable foreign reserves or trading in sovereign debt in the primary and secondary markets. 6 These sanctions have impaired Russia's ability to pay its debts using overseas foreign currency reserves, raising the specter of default. 7 The third category is energy. At first, the United States appeared to leave the energy market out of sanctions by creating express exceptions. The rationale was to maintain stability in energy markets, and to protect Europe, which is highly dependent on Russian energy products. Nevertheless, the United States soon banned the import of Russian oil, liquefied natural gas, and coal, as well as any new U.S. investment in Russia's energy sector. 8 The EU was reluctant at first. But in early April 2022, as evidence of atrocities in the Ukraine mounted, it began to contemplate energy sanctions, despite internal opposition from member states that rely on Russian energy supplies. 9 A fourth category captures other controls on international trade. The United States and other countries have imposed export controls designed to curtail Russian access to necessary commodities and technologies and to hinder Russia's military buildup. 10 In March 2022, the United States, Canada, the EU, and other G7 countries committed to revoking Russia's most-favored-nation status with respect to tariff treatment, which would effectively erase the benefits of Russia's World Trade Organization (WTO) membership with respect to trade in goods. 11 These measures were coupled with restrictions on investment, with Germany suspending certification of the Nordstream 2 gas pipeline, and the United States setting up further restrictions on investment in Russia. 12 The fifth category is transportation. Among other restrictions, Russian airlines are now banned from large swathes of the world. And the United States and EU have required leasing companies to repossess planes lent to Russian airlines. In retaliation, the Russian government has moved to seize commercial jets owned by Western leasing companies. 13 Finally, these measures have been accompanied by an exodus of private actors. BP, Apple, McDonald's, Mastercard, and Visa, among others, have suspended operations in Russia. Some of these actions may reflect "overcompliance" with sanctions, as firms reason that the cost of managing sanctions-related legal risk is not worth the benefit of doing business with Russia. 14 A mixture of market factors, state pressure, and principle may also be driving these actions.

Economic Sanctions Unrestrained
The overwhelming response, in the short term, reaffirms the central role of sanctions as a tool of the post-1945 legal order, and reaffirms a "laissez faire" approach to their application. Today, sanctions are a widely recognized pressure valve in international relations-an ostensibly non-violent measure that can be applied to influence state and increasingly individual behavior and punish violations of the law. This is a break with the older law of neutrality, in which the decision to restrain trade with only one party to a conflict could be considered a hostile act. 15 The legal distinction between economic force and war is widely accepted today, and it is reaffirmed in contemporary commentary that treats the allies' sanctions as wisely avoiding, rather than contributing to, military escalation.
The "pressure valve" view has become coupled with a relative absence of strong legal constraints on a state's decision on whether to deploy sanctions. The International Court of Justice's finding that even a comprehensive embargo does not breach customary international law, though it may violate an applicable commercial treaty, remains the point of departure. 16 In practice, rules of general international law that might have constrained a state's decision to use sanctions-such as non-intervention or limits on national jurisdiction-often seem to be at best a minimal constraint. 17 If sanctions do not violate a primary norm, then rules governing countermeasures, such as notice and proportionality, do not apply. 18 Domestic legal institutions in key sanction-imposing jurisdictions have also acquiesced in the practice and the fundamental legitimacy of sanctions as a tool of statecraft. In the United States in particular, a series of Supreme Court decisions in the 1980s "freed the president . . . to conduct widespread economic warfare merely by declaring a national emergency with respect to a particular country," while sidelining congressional oversight. 19 In principle, economic treaties-such as investment treaties and the WTO agreements-might play a constraining role, but contemporary treaties are also often designed to leave space for economic sanctions. Thus, while sanctions may implicate various liberalizing and non-discrimination requirements of trade and investment treaties, many such agreements contain security exceptions that allow a state to take "any action which it considers necessary for the protection of its essential security interests" in time of war or emergency. 20 In the present context, this exception is sufficient to justify the decision to suspend normal trade relations with Russia and Belarus.
International and domestic law are, however, starting to play a greater role in governing how sanctions are imposed. In past years, national and regional courts, as well as international bodies such as the United Nations and the WTO, have engaged in increasingly searching review of unilateral and multilateral sanctions and economic security measures. 21 The law governing sanctions and other forms of economic statecraft in each of these forums 15   remains unsettled, evolving, and largely uncoordinated. But the trend is toward the embrace of due process norms such as reason-giving, non-arbitrariness, and good faith. 22 On its surface, the war in Ukraine presents an apparent argument for the status quo. The United States, EU, and their allies have been able to act swiftly, with an immediate goal "to stop the killing spree by raising the price of financing the war and the overall cost of not reaching a peace settlement." 23 After years of retreating from multilateralism, a relatively broad international coalition managed to put up a robust, coordinated response to a clear international law violation. Sanctions were the key vehicle for enforcing the international order and reiterating its foundational norm against aggressive use of force. In this vein, mounting evidence of Russian atrocities in formerly occupied territory is generating calls for still further economic pressure. 24 If this war does end with the preservation of an independent Ukraine, it would likely bolster the argument in some quarters that sanctions law is best when it enables states to respond to emerging threats, rather than constraining them.
Beyond that best-case scenario, however, the picture starts to change. The pain that could be borne by ordinary Russians as the result of long-term sanctions is well-known and familiar from experiences in Iran, Iraq, and Cuba, among others. 25 Despite the enthusiasm for sanctions among European and NATO countries, much of the world -including all of Central and South America, Africa, and most of Asia-remains on the sidelines, and populations there are likely to suffer greatly from a prolonged, sanctions-induced recession. 26 Commentators have argued that sanctions are being applied by powerful Western countries selectively out of political expediency, complicating the claim that sanctions have expressive value reinforcing the international order. 27 Western interests, too, might start to lose patience with prolonged sanctions if the cost of "decoupling" from Russia seems to outweigh the strategic benefits obtained by isolating the country economically.

Toward a Working Sanctions Regime Complex?
Calls for closer regulation of economic sanctions are nothing new. In recent years, we have both argued that the increasing reach of the national security state-and the variability of security threats-is generating pressure for closer scrutiny of sanctions by courts and tribunals, with mixed results. 28 The current round of sanctions may add to that pressure. But it is not clear where such regulation would take place, much less who would carry it forward. The legal rules governing international sanctions are less a clear international regime than a "regime complex"-a loose and overlapping collection of largely domestic institutions, marked by disaggregated decision making and the potential for normative conflict. 29 When it comes to sanctions, the current moment points to any number of disparate, overlapping, and potentially conflicting ways forward. The international system's current focus on demanding due process and good faith in 22 Elena Chachko, Administrative National Security, 108 GEO. L.J. 1063 (2020); J. Benton Heath, The New National Security Challenge to the economic statecraft is a salutary development, and it could tame sanctions at the margins. But this kind of procedural review will do little to dent their overall appeal and macroeconomic impacts.
To some, harder limits on economic warfare are necessary. One response is to insist that the present situation reaffirms a line between military security matters, which justify extreme responses, and ordinary policy matters, which should not. This approach would have to confront deeply held divisions over the appropriate scope of national and international security policy and over whether such policies override the international system's commitments to liberalized trade and the rule of law. 30 Another response is to tighten loose domestic restrictions on the resort to sanctions. In the United States, Congress's role in sanctions policy has been primarily escalatory-imposing measures by law that remain on the books and are difficult to fully remove. 31 The present moment offers an opportunity to revisit Koh's suggestion of a "national security charter" to promote power sharing, deliberation, and even de-escalation by Congress. 32 Today, however, Congress may be more focused on expanding, rather than constricting, the president's powers to conduct economic warfare. 33 Beyond these approaches lie more transformative visions that seek to build on the impact of sanctions as a launching pad for long-needed reform. On one view, the difficulty of hunting down the assets of Russian oligarchs points to broader problems of tax evasion, regulatory arbitrage, and financial secrecy, aided by the lack of transparency in the global financial system. The revelations contained in the Pandora Papers and similar leaks of offshore financial arrangements have shown how Western elites use the same tools to hide their assets that Putin's inner circle are using to evade sanctions. On this view, the present sanctions offer an opportunity to push for greater financial transparency worldwide, including through the adoption of mandatory disclosure laws. 34 For others, the sanctions on Russian oil and gas are a wakeup call to finally transition to renewable energy in the name of both climate and national security. 35 Another left-leaning critique of sanctions contends that the speed and scope of these measures must be matched by an equally bold, state-led effort at economic stabilization, including through investment, grants, loans, subsidies, and, if necessary, price controls. 36 This argument points to the current mismatch between the legal regime for sanctions-which often rely on discretionary emergency powers-and the broader political coalitions that may be needed to sustain more positive forms of aid.

Conclusion
Going forward, the question is whether this high-profile economic war heralds any significant legal change. We are skeptical that the international legal order stands at the precipice of any kind of grand regulatory moment for economic sanctions, though legal reform is a worthy long-term goal. The present moment, instead, offers a set of overlapping and competing narratives, which are likely to be refracted through the overlapping and competing institutions that purport to govern economic warfare. 37 If there is any call for optimism today, it is the hope that the renewed public focus on economic conflict will generate an ethic of responsibility around sanctions, along with a toolbox of ideas that might be combined and experimented with as international politics lurches from crisis to crisis.