Winning: Improvising Around Sanctions


March 26, 2023: Russian leader Vladimir Putin likes to boast that Russia has managed to cope with economic sanctions imposed by the West because of the Ukraine War. The reality is different. The sanctions cut Russia off from the international banking system and reduced its income from natural gas and oil exports by at least half, so Russia scrambled to smuggle as much oil as it could. China and India were mostly the happy beneficiaries of this, but were only willing to pay in their own currencies rather than in gold or hard currency like dollars or euros. Russia thought it could discourage European aid for Ukraine by controlling European access to Russian natural gas supplies. That did not work. The Europeans managed to find other sources of natural gas that were more expensive.

The sanctions also cut off supplies of Western tech, which limited production of high-tech weapons like missiles, aircraft and warships, plus civilian items requiring tech the Russians couldn’t produce, such as computer chips for motor vehicles and coil bearings for railroads. Russian demands for ammunition, especially artillery and mortar shells, was more than its stockpiles or manufacturing facilities could support, the latter due mostly to years of under-producing replacements for existing stocks so that most facilities for munitions production were scrapped. After a year of fighting, Ukrainian troops have access to more artillery shells than does Russia.

The sanctions were not the only problem. Russia has been suffering economically and militarily because of its invasion of Ukraine. That has forced Russia to adapt and that means establishing closer relationships with Iran. Russia already had a number of diplomatic, economic and military relationships with Iran. At the same time Iran has a lot more experience operating as an outcast or pariah state. In the past Russia was the senior partner when it came to deals with Iran. Because of the Ukraine sanctions, Russia needs Iran more than the other way around. Iran is able to dictate terms and gain a lot of trade concessions from Russia.

This realignment became tangible in June when Russia and Iran signed a new agreement that expanded economic and political cooperation between the two nations. This agreement ignores sanctions currently imposed on Russia and Iran and formalizes the cooperation between the two oil producers to evade Western efforts to prevent Iran and Russia from exporting its oil. The new agreement also confirms joint efforts to support each other militarily. Iran has supported the Russian invasion of Ukraine while Russia backs Iranian threats to other Middle Eastern oil producers. This does not include unofficial Russian agreements in Syria that keep Israel and Russia from going to war because of continued Israeli attacks on Iranian forces in Syria. Russia continues to support Iranian efforts to expand its influence over the Iraqi government.

Russia has provided Iran with a Kanopus-V satellite, which enables Iran to obtain high-resolution views of “enemy” territory and the ability to improve its overseas operations. Russia also provides many industrial items Iran has had difficulty obtaining. Russia has also shipped Iran stolen Ukrainian grain, which is popular with the Iranian population and the many shortages they have to put up with.

Russia has more attractive trade options for Iran, especially when it comes to modern warplanes. Decades of economic sanctions against Iran have resulted in no new warplanes or even spare parts for what they already had. Russia is now willing to supply modern aircraft and helicopters and even establish a joint maintenance center in Iran. This is made possible by the Caspian Sea connection. Both Russia and Iran have Caspian Sea coastlines. This landlocked sea makes it possible to easily and safely move all sorts of cargo back and forth.

Israel has not been providing any weapons to Ukraine because of Iranian activity near the Israeli border in Syria. Israel needs to maintain good relations with Russia to deal with the Iranian threat. Russia told Israel that sending weapons to Ukraine could reduce Russian cooperation in Syria against Iran. Most Israelis support Ukraine, but the Iranian threat is very real and next door, so Israeli politicians cannot ignore it unless they want to lose their next election. Russia does not want to lose its relationships with Israel but now Iran is in a position to force the matter. Russia appears to be seeking a compromise with Israel that will not offend Iran.

Other parties in Syria have been renegotiating relationships in Syria. In May Syrian leader Bashar Assad made an unannounced visit to Iran, apparently to negotiate how Syria and Iran would take over Russian bases and any Russian equipment left behind. Most Russian ground forces in Syria returned to Russia because of the war in Ukraine. These Russian troops consist of special operations forces, military advisers and tech support personnel who help maintain Russian weapons used by Syria. The departing Russian troops were first moved to a Russian controlled airbase near the Mediterranean coast and then flown back to Russia. Some of the abandoned bases were transferred to Iranian control and used by Iran-backed militias, including Lebanese Hezbollah.

Russia is not used to being the junior partner but desperate times require uncommon adaptability to survive. Russia has had to accept Chinese terms for their economic relationship. Israel is particularly difficult because that relationship goes back to the founding of Israel and has proven to be well worth maintaining. Iran can be a major problem for Israel because of the new Iranian arrangement with Russia.

Ukraine is already feeling the impact of Iranian support for Russia. Iranian UAVs are showing up in Ukraine, but have not proven as effective as Russia hoped. Iran also assigned some of its hacker groups to support Russian efforts in Ukraine. That did not lead to Cyber War attacks on Ukraine but instead on nearby NATO nations. Ukraine has a formidable reputation when it comes to Cyber War and the Ukrainians have deployed their capabilities to deal with Russian hackers trying to assist Russian forces there. That has not worked out well for the Russians and Iran does not want to join Russia on the Ukrainian Cyber War hit list.

Russian leader Vladimir Putin appears determined to keep the Ukraine War going as long as he can and refuses to recognize the possibility of the Ukrainians winning. That may be where some deals with Iran are going but the Ukrainians have a vote, and they are voting for more battlefield victories over Russia. Iran is impressed with Ukrainian military successes but does not dwell on it. China appears to be gaining the most from Russia’s invasion of Ukraine. China was not pleased and quietly expressed displeasure with Russian leaders. China does not want to get sanctioned by violating the Western sanctions on Russia by supplying weapons or high-tech components. China would still sell (for cash, not on credit) dual-use items that could be used by Russian troops. This included UAVs and a few other items. Russia has less cash to spend and must barter with Iran and North Korea for munitions and military equipment.

Western sanctions were not meant to wreck or seriously injure Russia’s economy, though the railroad coil bearing embargo might eventually have that effect. Instead, the sanctions were designed to do maximum damage to the Russian military and did, spectacularly so. There was some damage to the civilian economy but nothing as dramatic as the impact on Russian military production.




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