Energy shock, inflation, fear of the future: the sanctions against Russia are also having a painful impact in Germany. Erdal Yalcin, Professor of International Economic Relations, explains on FOCUS online why the sanctions don’t stop Putin, but are indispensable.

Exploding energy prices, inflation at a record level, fears of existence among many companies and citizens – Germany is currently going through a severe economic and social crisis. Despite several relief packages from the federal government, millions of people are looking to the future with concern and wondering how they will get through the winter.

The main reasons for this development: Russia’s war of aggression against Ukraine, Putin’s turning off the gas tap and the Western sanctions policy against the Kremlin regime. Experts knew from the start that the sanctions would not only hit Russia, but also fall back on Western countries. Nevertheless, many are now surprised at how far-reaching the effects on the German economy are.

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In addition, the sanctions have so far failed to have any political effect. The declared aim of the western measures against Russia is that Putin is persuaded to give in and that the war is ended. Seven months after the beginning of the Russian attack, there can be no talk of that – on the contrary. With the partial mobilization of his armed forces and the threat of nuclear strikes, Putin has made it crystal clear that he will even step up his fight against Ukraine and the West.

Sanctions that do not force Putin to change course, but lead to massive problems in the sender countries like Germany – how does that fit together?

FOCUS online talked about it with Erdal Yalcin, Professor of International Economic Relations at the University of Konstanz and an expert on sanctions. On his initiative, an international research team created a database in which all sanctions imposed worldwide since 1950 were recorded and analyzed for their effects, more than 1400 cases.

Yalcin explained that the sanctions would hit Germany “particularly hard”. The reason is the high energy dependency on Russia. “In addition, the sanctions against Russia are fueling global inflation, and goods are becoming more expensive. For a country like Germany, which achieves great prosperity primarily through high export rates, these are extremely bad developments,” says Yalcin. In addition to the domestic economy, exports are also threatening to collapse. “It has to be said very clearly that the sanctions against Russia are a driver of these developments.”

Quite a few people are now wondering whether the sanctions should be lifted in the near future or at least relaxed so as not to endanger internal peace, especially in Germany. Erdal Yalcin rejects this. “I don’t think that in view of Putin’s clear violation of international law, there is even a question of lifting the sanctions against Russia. On the contrary, the sanctions should be expanded,” says the economics expert to FOCUS online.

At the same time, the 46-year-old explains that sanctions need time and other accompanying measures so that they can take effect. In addition, the question urgently needs to be answered “how the negative consequences of the sanctions in Germany can be mitigated,” said the economics expert. In concrete terms, politicians must find solutions as to how the high costs for the population can be reduced in a way that is bearable and socially just.

“In my view, the federal government should communicate the upcoming costs for the population much more aggressively,” demands Yalcin. There is a clear majority in Germany that supports Ukraine and supports sanctions against Russia. “However, it is counterproductive when the state tries to play down unpleasant aspects such as pending insolvencies or enormously high gas costs. People and companies need planning security so that they can counteract possible long-lasting negative economic consequences”.

Regarding the effectiveness of the Western measures, the professor explains: “The sanctions have not been effective, at least so far”. In justification, he explained: “We have to keep in mind that Russia is an important player on the world markets for oil and gas, but also for important raw materials such as wheat, sunflowers, uranium and coal. Changes in Russian exports affect world market prices.”

Although Russia is selling less oil as a result of the EU sanctions, it is benefiting from the massive increase in oil prices. In addition, the prospect of increased sanctions means that commodity prices will continue to shoot up. “That’s why Russia is making historic gains despite declining exports.”

Yalcin criticizes that it is not only the development of the world market that is ensuring that the sanctions are not having the desired effect in the West, it is also partly due to the sanctions policy of the EU itself. “It is simply nonsensical that the EU wants to stop importing oil from Russia from the beginning of 2023, but at the same time will continue to allow Greek shipping companies to export Russian oil to the world.” As a result, Russia continues to make money and at the same time EU citizens wonder “why should they bear higher oil prices when countries like China, Turkey or India can buy cheap Russian oil”.

The professor for international economic relations sums it up: “The special rights for Greek shipping companies are simply an enormous weakening of the EU sanctions.” The EU decision-making rules with their unanimity principle prevent a sensible sanctions policy, the expert complains. “Greece simply threatened to veto the 6th package of sanctions. As a result, this inefficient sanctions policy comes about.” In addition, many countries do not participate in the sanctions of the EU and the USA. “China, India and Turkey have all tripled their commodity imports from Russia in recent months,” Yalcin notes.

The expert calls on the EU to comprehensively implement future sanctions and to refrain from special rules for other countries. “Otherwise the sanctions will lose too much of their impact.” The fact that Russia is currently making significant profits despite the restrictions should not throw the West off its course. “If the EU consistently expands the sanctions, Russian revenues will fall and Russia will have increasing economic problems,” said Yalcin. “The emphasis is on consistent sanctions.”

The Konstanz professor is firmly convinced that the Russia sanctions represent “an important building block in the defense of Western values”. In addition, however, further measures are needed, such as military support for Ukraine and pressure on other countries such as India, Turkey and China to support the sanctions. In addition, the West must help the Russian opposition.

Erdal Yalcin has been Professor of International Economic Relations at the University of Konstanz (HTWG) since 2018. Previously, he was deputy director of the ifo Center for Foreign Trade at the ifo Institute. He did his doctorate at the University of Tübingen on the role of uncertainty in foreign direct investment and export decisions. In his research he focuses on the role of uncertainty in international trade policy and on evaluating the economic effects of trade agreements and sanctions.

The experiences of the last 70 years have taught us that political goals can only be achieved with great difficulty or not at all with sanctions alone. At the same time, the historical data showed “that wars and territorial conflicts can be successfully resolved through a combination of economic sanctions and military measures”. However, it is unclear to what extent this can succeed with the Putin regime, after all there is no comparable precedent. “Russia is the largest country in the world, can veto the UN Security Council, has nuclear weapons,” Yalcin warns.

The conclusion of the sanctions expert is unequivocal: “We have to realize that Russia is putting itself above international law with the argument that at least parts of Ukraine are Russian sovereign territory. If the EU and the West do not oppose this approach, there is a risk of a domino effect,” warns Yalcin, reminding of other trouble spots. “We already have similar political ambitions in other neighboring countries. Azerbaijan and Armenia have started military clashes over border disputes. China is ramping up rhetoric on Taiwan. There are always tensions between Greece and Turkey over borders.”

Erdal Yalcin: “It is therefore not just about the sovereignty of Ukraine, but about maintaining international law, which dramatically improved peace in Europe and the world after the Second World War.” If the EU because of the high economic costs of the sanctions and the other necessary measures such as military support, “it risks the weakening of international law and more wars not only in the rest of the world, but also on the immediate borders of the EU.”