Davos, Switzerland – On January 19th, an event dedicated to the efficiency of sanctions against Russia and the expansion of the sanctions coalition was held at the Ukrainian House as part of the World Economic Forum. The participants emphasized the importance of sanctions as a tool for achieving peace and stability in Ukraine and around the world.

The purpose of the event was to demonstrate how sanctions can be effectively used to accelerate a victory for Ukraine by stimulating negotiations and reducing Russia’s ability to continue the war. Thus, the war can be brought to an end sooner and with fewer consequences for the world.

Vladyslav Vlasyuk, the co-secretary of the Yermak-McFaul group, adviser to the President’s Office, was moderating the event. The Government of Ukraine was represented by the First Deputy Prime Minister and Minister of Economy of Ukraine, Yulia Svyridenko.

Ms. Svyrydenko, when quoting President Zelenskyi, underlined the need for the international community to support Ukraine and speed up the implementation of sanctions. She also emphasized the importance of sanctions as a tool to supplement the strength of the Ukrainian military. At the event, they also took notice of the progress achieved in the development and implementation of sanctions and reducing dependence on Russia in Ukraine and Europe. Ms. Svyrydenko emphasized that countries that join Russia or participate in the circumvention of restrictions contribute to the continuation of the war and the strengthening of negative consequences not only for Ukraine, but also for food security, the energy market uncertainty and other problems. Yulia Svyrydenko reported on the latest negotiations with some countries of the Global South, highlighting the existing differences, as well as achievements and prospects. Ms. Svyrydenko emphasized that all countries should make a decision to stand on the right side of history.

Yermak-McFaul’s group was represented by Tymofiy Mylovanov, President of the Kyiv School of Economics and associate professor of economics at the University of Pittsburgh, and Natalia Shapoval, Head of the KSE Institute. Among the international experts in this field, there also was Kenneth Rogoff,  professor of International Economics at Boas Harvard University.

Ms. Shapoval emphasized that the impact on the Russian economy began to materialize at the end of 2022. With the entry into force of sanctions on oil and oil products in December 2022 – February 2023, Russia is bound to lose over a half of its income from the export of energy carriers. Considering that the Russian budget was almost 50% dependent on these revenues, this will make it difficult to finance the war, forcing a choice between pension and social and military spending. And the large pocket of reserves that Russia enjoyed in 2022, namely the National Welfare Fund, Gazprom and borrowings on the domestic market, will simply run out in 2023. In the 4th quarter of the year 2022, Russia had to resort to using about USD 35 billion US equivalent from the National Welfare Fund, through a specially created tax on excess profits for Gazprom and through borrowing on the domestic market.

Ms. Shapoval dispelled the Russian narrative that the world economy is suffering from sanctions. In fact, the development of the restrictions was based on the principles of minimizing risks for the world economy, in particular vulnerable countries and sections of the population.

Professor Mylovanov directly addressed the narrative that is spreading in Russia and some other countries: the opinion that while sanctions do have a punitive and resource-draining effect on Russia, they keep making Russia angrier, and thus lead to a vicious cycle of escalation. However, in reality, sanctions were almost the only thing that Russia reacted to rationally. In particular, during the negotiations on the grain agreement, where Russia publicly asked to supply ammonia by Ukrainian pipeline in exchange for the lifting of sanctions.

Speaking about the reasons why other countries may want to join the sanctions coalition, Mylovanov noted that in addition to the primary and main argument of being humane and fighting evil, these countries have a number of pragmatic reasons: to stay independent from Russia, and to continue cooperation with countries that represent the world’s largest markets, investments and wealth.

Kenneth Rogoff noted that the introduction of secondary sanctions against those countries and companies that help Russia circumvent sanctions is critically important to prevent a decrease in the effectiveness of restrictions. Regime change in Russia is also a very lengthy process, so all measures must be combined to reduce the chances of a repeated aggression.

He repeated the point made by moderator Vladyslav Vlasyuk and other speakers that it is short-sighted for European countries to think about anything other than winning the war, because the war also has very clear consequences for the EU, including a decrease in their investment attractiveness.