World-Watching: The Problem with the Current Russia Sanctions Regime

[from Project Syndicate, by Mohamed A. El-Erian]

There is much debate about the effectiveness of Western sanctions, the Ukraine war’s implications for markets and the global economy, and what the West’s next steps should be. While there are few good options, some are clearly worse than others.

Cambridge — It has been five months since Europe and the United States imposed tough economic and financial sanctions on Russia, a G20 country that was the world’s eleventh-largest economy on the eve of its invasion of Ukraine. While the sanctions have been gradually strengthened in the intervening months, debate rages about their effectiveness, the war’s broader implications for markets and the global economy, and what the West’s next steps should be.

On the first question, although the sanctions have been less effective than Europe and the U.S. had hoped, they also are proving more onerous than the Kremlin claims. Russia’s central bank expects GDP to contract by 8-10% this year, while other forecasters expect a larger fall, together with longer-lasting damage to growth potential. Imports and exports have been severely disrupted, and inflows of foreign investment have essentially stopped. Shortages are multiplying, pushing inflation higher. At this point, the country no longer has a properly functioning foreign-exchange market.

The sanctions would have bitten much harder had the West not opted for a carve-out of Russia’s energy sector, and had many more countries joined the U.S. and Europe in the effort. Because that didn’t happen, Russia has not felt nearly as much pressure as it would have. Moreover, it has been able to continue trading through various side and back doors that will likely become increasingly important as long as the sanctions regime, as currently designed, continues.

Nonetheless, it is only a matter of time before the Russian economy experiences a harder hit. Inventories of imported goods – including many critical technological and industrial inputs – are dwindling fast, and many sectors are becoming less resilient. The cumulative damage to Russia’s economy over time will be significant and long-lasting – a fact that has not yet been fully captured by consensus medium-term forecasts.

The second question concerns global spillovers from the war and the sanctions regime. Most observers agree that Russia’s invasion has increased not just energy insecurity but also food insecurity, highlighting the fallout from the war’s disruption to Ukrainian agricultural exports. But there is still much debate about the West’s use of the economic nuclear sanctions option: the curbs placed on Russia’s central bank and on Russia’s use of the international payments system.

These curbs are far more intrusive than the usual mix of restrictions on sanctioned government and private sector trade and on individuals’ financial dealings. Yet, because they are not subject to any internationally agreed standards, guidelines, or checks and balances, they fall outside the purview of relevant global-governance bodies such as the Bank for International Settlements, the International Monetary Fund, and the World Trade Organization.

In a time of war, such oversight might seem like a nicety. But some worry that the sanctions could significantly reduce the dollar’s role as the world’s reserve currency and the U.S. financial system’s role as the primary global intermediary for other countries’ savings and investments. After all, a growing number of countries undoubtedly now feel more vulnerable to the reach of U.S. sanctions.

But it is impossible to replace something with nothing, which means that no significant loss of dollar or U.S. financial primacy will occur in the immediate future. Rather, the sanctions will lend further momentum to the gradual process of global economic fragmentation, which was also fueled a few years ago by the tariffs imposed by the Trump administration. More countries now have even more of a reason to pursue greater financial resilience and inherently inefficient forms of self-insurance.

That brings us to the third debate. With no end in sight for the war, what should the West do next? Fearing the implications for energy prices and the supply of gas to Europe, many in the West are tempted to call for a moratorium on any new sanctions – or even for additional carve-outs. Others, however, favor additional measures to hold Russia accountable for its indiscriminate attacks on Ukrainian civilians.

In any case, maintaining the current sanctions regime is not problem-free, owing to the twin objectives of pressuring Russia and limiting the economic disruption to Europe. Moreover, as European Commission President Ursula von der Leyen recently said, it feels as if Russia is “blackmailing” Europe by threatening to disrupt gas supplies at any moment. No wonder the Commission is urging member countries to cut consumption by 15%.

Under the current sanctions regime, the West risks falling between two horses. While easing sanctions could help alleviate concerns about Europe’s economic outlook, this option is a non-starter, given the atrocities that Russian forces are committing in Ukraine. But if the West is serious about pressuring Russia through truly crippling economic and financial sanctions, it needs to bite the bullet and eliminate the carve-outs for energy.

Doing so would undoubtedly have a severe short-term economic impact on European economies and the rest of the world, amplifying the “little fires everywhere” syndrome that I warned about in May. It is therefore critical that governments use their available fiscal space to provide targeted support to vulnerable segments of the population, as well as to fragile countries; and multilateral agencies must support developing countries through aid and a more operational debt relief framework. If done properly, this option would yield better outcomes in the medium and long term than the current strategy.

Muddling through risks bringing about the worst of all possible worlds. It is insufficient to dissuade Russia from continuing its illegal war; it is fueling deeper fragmentation of the international monetary system; and it is not even protecting Europe from a winter gas disruption.

Mohamed A. El-Erian, President of Queens’ College at the University of Cambridge, is a professor at the Wharton School of the University of Pennsylvania and the author of The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse (Random House, 2016).

Essay 89: Physics AI Predicts That Earth Goes Around the Sun

from Nature Briefing:

Hello Nature readers,

Today we learn that a computer Copernicus has rediscovered that Earth orbits the Sun, ponder the size of the proton and see a scientific glassblower at work.

Physicists have designed artificial intelligence that thinks like the astronomer Nicolaus Copernicus by realizing the Sun must be at the center of the Solar System. (NASA/JPL/SPL)

AI ‘Discovers’ That Earth Orbits the Sun [PDF]

A neural network that teaches itself the laws of physics could help to solve some of physics’ deepest questions. But first it has to start with the basics, just like the rest of us. The algorithm has worked out that it should place the Sun at the centre of the Solar System, based on how movements of the Sun and Mars appear from Earth.

The machine-learning system differs from others because it’s not a black that spits out a result based on reasoning that’s almost impossible to unpick. Instead, researchers designed a kind of ‘lobotomizedneural network that is split into two halves and joined by just a handful of connections. That forces the learning half to simplify its findings before handing them over to the half that makes and tests new predictions.

Next FDA Chief Will Face Ongoing Challenges

U.S. President Donald Trump has nominated radiation oncologist Stephen Hahn to lead the Food and Drug Administration (FDA). If the Senate confirms Hahn, who is the chief medical executive of the University of Texas MD Anderson Cancer Center, he’ll be leading the agency at the centre of a national debate over e-cigarettes, prompted by a mysterious vaping-related illness [archived PDF] that has made more than 2,000 people sick. A former FDA chief says Hahn’s biggest challenge will be navigating a regulatory agency under the Trump administration, which has pledged to roll back regulations.

Do We Know How Big a Proton Is?

A long-awaited experimental result has found the proton to be about 5% smaller than the previously accepted value. The finding seems to spell the end of the ‘proton radius puzzle’: the measurements disagreed if you probed the proton with ordinary hydrogen, or with exotic hydrogen built out of muons instead of electrons. But solving the mystery will be bittersweet: some scientists had hoped the difference might have indicated exciting new physics behind how electrons and muons behave.

Contingency Plans for Research After Brexit

The United Kingdom should boost funding for basic research and create an equivalent of the prestigious European Research Council (ERC) if it doesn’t remain part of the European Union’s flagship Horizon Europe research-funding program [archived PDF]. That’s the conclusion of an independent review of how UK science could adapt and collaborate internationally after Brexit — now scheduled for January 31, 2020.

Nature’s 150th anniversary

A Century and a Half of Research and Discovery

This week is a special one for all of us at Nature: it’s 150 years since our first issue, published in November 1869. We’ve been working for well over a year on the delights of our anniversary issue, which you can explore in full online.

10 Extraordinary Nature Papers

A series of in-depth articles from specialists in the relevant fields assesses the importance and lasting impact of 10 key papers from Nature’s archive. Among them, the structure of DNA, the discovery of the hole in the ozone layer above Antarctica, our first meeting with Australopithecus and this year’s Nobel-winning work detecting an exoplanet around a Sun-like star.

A Network of Science

The multidisciplinary scope of Nature is revealed by an analysis of more than 88,000 papers Nature has published since 1900, and their co-citations in other articles. Take a journey through a 3D network of Nature’s archive in an interactive graphic. Or, let us fly you through it in this spectacular 5-minute video.

Then dig deeper into what scientists learnt from analyzing tens of millions of scientific articles for this project.

150 Years of Nature, in Graphics

An analysis of the Nature archive reveals the rise of multi-author papers, the boom in biochemistry and cell biology, and the ebb and flow of physical chemistry since the journal’s first issue in 1869. The evolution in science is mirrored in the top keywords used in titles and abstracts: they were ‘aurora’, ‘Sun’, ‘meteor’, ‘water’ and ‘Earth’ in the 1870s, and ‘cell’, ‘quantum’, ‘DNA’, ‘protein’ and ‘receptor’ in the 2010s.

Evidence in Pursuit of Truth

A century and a half has seen momentous changes in science, and Nature has changed along with it in many ways, says an Editorial in the anniversary edition. But in other respects, Nature now is just the same as it was at the start: it will continue in its mission to stand up for research, serve the global research community and communicate the results of science around the world.

Features & Opinion

Nature covers: from paste-up to Photoshop

Nature creative director Kelly Krause takes you on a tour of the archive to enjoy some of the journal’s most iconic covers, each of which speaks to how science itself has evolved. Plus, she touches on those that didn’t quite hit the mark, such as an occasion of “Photoshop malfeasance” that led to Dolly the sheep sporting the wrong leg.

Podcast: Nature bigwigs spill the tea

In this anniversary edition of BackchatNature editor-in-chief Magdalena Skipper, chief magazine editor Helen Pearson and editorial vice president Ritu Dhand take a look back at how the journal has evolved over 150 years, and discuss the part that Nature can play in today’s society. The panel also pick a few of their favorite research papers that Nature has published, and think about where science might be headed in the next 150 years.

Where I Work

Scientific glassblower Terri Adams uses fire and heavy machinery to hand-craft delicate scientific glass apparatus. “My workbench hosts an array of tools for working with glass, many of which were custom-made for specific jobs,” says Adams. “Each tool reminds me of what I first used it for and makes me consider how I might use it again.” (Leonora Saunders for Nature)

Quote of the Day

“At the very least … we should probably consider no longer naming *new* species after awful humans.”

Scientists should stop naming animals after terrible people — and consider renaming the ones that already are, argues marine conservation biologist and science writer David Shiffman. (Scientific American)

Yesterday was Marie Skłodowska Curie’s birthday, and for the occasion, digital colorist Marina Amaral breathed new life into a photo of Curie in her laboratory

(If you have recommended people before and you want them to count, please ask them to email me with your details and I will make it happen!) Your feedback, as always, is very welcome at

Flora Graham, senior editor, Nature Briefing