Former No 10 Downing Street chief of staff and architect of the Northern Ireland peace deal Jonathan Powell has warned the wall of international sanctions erected in response to Vladimir Putin's war in Ukraine won't bring the conflict to a halt.
The track record of similar financial measures to ensure that countries were forced out of trade and markets was not encouraging, said Mr Powell, who worked alongside Tony Blair during the years of the Iraq war, which came after more than a decade of sanctions.
"I'm not convinced that sanctions do what we think they do, I'm not sure they ever have done what we thought and I not sure the Russia sanctions will make much impression on Putin at all," he told a meeting in London on Wednesday. "They make us feel a bit better about things and make life worse for the Russian people.
"In Iraq they made life worse for the Iraqi people and those near Saddam found a way around it."
European and US policymakers have imposed sanctions on hundreds of prominent Russians and sought to seize assets including trophy yachts and landmark properties. The EU is seeking agreement from its member states for an embargo on Russian oil, though it continues to be dependent on Russian gas.
Europe imported 3.8 million barrels a day from Russia before the war. Energy is the main pillar of the Kremlin's budget. The Russian government could rely on an average of 43 per cent of its revenue from oil and natural gas between 2011 and 2020.
Europe is the biggest purchaser of Russian crude, receiving 138 million tonnes in 2020 out of Russia's total exports of 260 million tonnes. Put another way, a quarter of European needs is sourced from Russia.
Moscow has claimed that US sanctions freezing its currency reserves held abroad means it can't pay outstanding foreign debt. Russia argues it wasn't to blame for any default, the first on foreign debt since the 1917 Bolshevik Revolution.
As the far-reaching Western sanctions bit against Russian banks and other institutions, the rouble plummeted forcing the Russian Central Bank to rush to shore it up. President Putin signed a decree restricting foreign currency.
In the aftermath of the invasion on February 24, the Russian currency was trading as low as 120 roubles to the euro, which represented a depreciation of 35 per cent from its highs. It reached a turning point on March 7 and has since staged a dramatic recovery. This week it traded at 77 roubles to the euro, the highest level in two years.
A move by Moscow to force European states to pay for gas imports in roubles has actually driven up demand for the currency, highlighting one flaw in the EU strategy, analysts say. "One of the main drivers of the rouble's appreciation is Vladimir Putin's strategy of requiring some buyers of Russian natural gas to pay their gas bills in roubles," said a report circulated this week from Charles-Henry Monchau, chief investment officer of Banque Syz.
"Natural gas contracts are usually written in euros or dollars, and the countries that buy this gas — the EU, the United States, Canada, etc — have few reserves," it said. "Forcing these countries to pay in Russian currency will result in rouble purchases in large quantities."
