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Speech at the Foreign Affairs debate – Tuesday 5th March 2024

Summary:
My Lords, it is a rare privilege for us to have the Foreign Secretary wind up a debate on foreign policy in this House. Such are the quirks of politics, I suppose. I shall concentrate on one topic, and that is economic sanctions. The sanctions regime has emerged as one of the most important tools of British foreign policy. Despite, or perhaps because of their long and tangled history, their rationale remains deeply mysterious. Are they tools of war avoidance or an extension of war by other means? It is a hybrid tool, at best. This ambiguity is fatal to any peacekeeping or peacemaking purposes they may have, because they insert a warlike mentality into what should be efforts at peace—hence the utmost clarity is needed in defining their purpose and assessing their results. Since

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My Lords, it is a rare privilege for us to have the Foreign Secretary wind up a debate on foreign policy in this House. Such are the quirks of politics, I suppose.

I shall concentrate on one topic, and that is economic sanctions. The sanctions regime has emerged as one of the most important tools of British foreign policy. Despite, or perhaps because of their long and tangled history, their rationale remains deeply mysterious. Are they tools of war avoidance or an extension of war by other means? It is a hybrid tool, at best. This ambiguity is fatal to any peacekeeping or peacemaking purposes they may have, because they insert a warlike mentality into what should be efforts at peace—hence the utmost clarity is needed in defining their purpose and assessing their results.

Since 2014, the number of individuals designated under the UK sanctions regime has grown from 230 to 2,000. The Foreign Secretary added another 50 a fortnight ago. Their stated purpose is, as has been said, to “degrade Russia’s war-making capacity” and deplete Putin’s armoury. US Treasury Secretary Janet Yellen predicted that the “Russian economy will be devastated” by sanctions, after Russia invaded Ukraine in 2022. Two years on, Russia’s economy is a long way from being devastated; indeed, it has proven far more resilient than many believed possible. The IMF now predicts that Russian GDP will expand by 2.2% this year, much faster than is predicted for the UK.

There are two main reasons for this. The first is trade diversification. Far from having no place to hide, as Liz Truss, then Foreign Secretary, predicted on 31 January 2022, Mr Putin and his friends have found plenty of places to hide. Moscow has been able to pivot its oil exports towards Asia, now the destination for 80% of Russian crude delivered by sea. Sanctioned goods, including critical components for military equipment, continue to reach Russia via neighbouring countries. Beijing is now Moscow’s main trading partner, and the yuan is one of the main foreign currencies in Russia. That is one reason. The second reason for Russia’s economic resilience is what I would call military Keynesianism. Russia has successfully converted a civilian economy into a war economy. Not only is growth positive, but a higher fraction of GDP is concentrated on war production.

The efficacy of economic sanctions has been repeatedly challenged by experts—not least, I should say, in the report on economic sanctions of the House of Lords Economic Affairs Committee, on which I had the honour to serve. Not only may the efficacy of sanctions be questioned, but they stitch animosity into the fabric of international relations, thus precipitating the break-up of the global trading and payment system which, in turn, makes the world more warlike. There are lots of unintended consequences here, and we need to be very clear about what they are before simply urging more and more sanctions. It would be an important outcome to this debate were the Foreign Secretary to authorise a strategic review of the purpose and track record of sanctions to be made public before international relations are allowed to drift into a permanent warlike state, which may easily topple over into actual war between nuclear powers.

Robert Skidelsky
Keynesian economist, crossbench peer in the House of Lords, author of Keynes: the Return of the Master and co-author of How Much Is Enough?

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