Stockholm – As the war in Ukraine grinds on, with twenty rounds of European Union sanctions levied against Russia, a leading economist argues that a more forceful economic strategy could bring the conflict to a swifter resolution. Torbjörn Becker, Director of the Stockholm Institute of Transition Economics (SITE) at the Stockholm School of Economics, contends that existing sanctions, while impactful, haven’t gone far enough. He suggests that a fully implemented economic plan, designed by economists supporting Ukraine, could potentially end the war within six months. The analysis comes as Sweden continues to be a major supporter of Ukraine, having pledged 114 billion Swedish krona – its largest commitment to another country in modern times – to aid the nation’s defense, and stability.
Becker presented his assessment at a recent seminar hosted by the European Parliament in Stockholm, convened to mark the anniversary of Russia’s full-scale invasion. His argument centers on the fundamental factors that dictate a nation’s economic health: gross domestic product (GDP), state finances, inflation, and the financial system. According to Becker, the Russian economy is uniquely susceptible to external pressure, functioning as what he describes as “the world’s simplest macro model” due to its heavy reliance on oil revenues. “If you have the oil price, you can essentially calculate how the Russian economy is doing,” he explained.
The Power of Targeted Sanctions
The core of Becker’s proposal lies in more aggressively targeting Russia’s revenue streams, particularly its oil and gas exports. While existing sanctions have had an effect, he believes they lack the necessary breadth and depth to truly cripple the Russian war machine. A significant component of this strategy involves curtailing Russia’s access to the technology needed to produce weapons. Even though China provides some of this support, Becker emphasizes that loopholes in the EU’s sanctions regime allow for continued imports. He pointed to resistance within the EU, noting that some member states, like Hungary and Slovakia, are heavily reliant on Russian energy and show limited enthusiasm for stricter measures.
Becker also highlighted a troubling trend: several EU member states continue to host companies that are actively doing business in Russia. “At meetings I’ve attended, the argument is made: ‘We need to think about our companies that are still in Russia,’” he said, describing the sentiment as “completely incomprehensible.” He drew a parallel to financial crises, where governments bail out banks to prevent systemic collapse, creating a situation where “private profits” are socialized through “public bailouts.” In this case, he argues, private companies are profiting in Russia while taxpayers bear the cost of supporting Ukraine.
Frozen Assets and Economic Pressure
A key element of Becker’s plan, and one supported by the Swedish government, is the utilization of approximately 300 billion euros in frozen Russian assets to directly aid Ukraine. However, the EU has yet to reach a consensus on this issue. Instead, the union has opted for a 90 billion euro loan, effectively “buying time,” according to Becker.
For Russia, raising capital through borrowing is no longer an option, as international markets have ceased purchasing Russian state bonds. This leaves the country facing a likely scenario of resorting to printing money, a move that would inevitably trigger hyperinflation and potentially lead to a banking crisis. The implications of such a scenario extend beyond Russia’s borders, potentially destabilizing the region and impacting global markets.
Becker’s “best realistic hope” currently rests on the enforcement of the EU’s recently adopted sanctions package targeting the “shadow fleet” – vessels used to circumvent oil price caps. As reported by the Stockholm School of Economics, limiting Russia’s oil and gas income remains the top priority. Torbjörn Becker’s analysis underscores the complex interplay between economic pressure and geopolitical realities in the ongoing conflict, highlighting the need for sustained and coordinated international efforts to achieve a lasting resolution.
The debate over the effectiveness of sanctions and the best path forward for Ukraine is likely to continue. The European Parliament is scheduled to revisit the issue of frozen Russian assets in March, with further discussions expected on strengthening existing sanctions and exploring new measures to increase economic pressure on Moscow.
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