The G-7 imposed the largest sanctions and export controls regime ever enforced against a major economy after Russia invaded Ukraine last year. It dropped exports to Russia by $5.7 billion a month on average, or 57 percent overall. The U.S. has suggested imposing a total ban on G-7 exports to Russia.
The problem with that is that almost all of the remaining $4.7 billion in monthly G-7 exports to Russia is coming from Europe (89 percent) and Japan (7 percent), whose leaders have already suggested that a complete ban on remaining exports “may not be realistic.”
“The question is what compensation would go to European manufacturers and farmers and others,” said Josh Lipsky, senior director of the Atlantic Council’s GeoEconomics Center. “We’ll see how far they get. If it was easy, they would have done it already.”
Officials believe that further reducing exports to Russia would require closing some of the loopholes in the current sanctions regime. But the rest may be harder to achieve. Any U.S. proposal, for instance, would almost certainly exempt pharmaceuticals, the biggest category of the remaining exports.
“We are committed to holding Russia accountable, and in coordination with our G-7 partners have put in place the largest set of sanctions and export control actions ever imposed on a major economy,” a National Security Council spokesperson said. “These actions have had a significant impact, undercutting Russia’s ability to fund and fight its unjust war. You can expect us to make progress on taking steps to continue to hold Russia accountable.”
What additional sanctions and export controls all G-7 countries eventually agree to is still being worked out. But if you drill down on specifics, it’s hard to see what works.
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Europe, which has already borne most of the economic brunt of limiting its trade relationship with Russia, is unlikely to agree to a sweeping export ban. With inflation still high and elected leaders facing a frustrated, increasingly anxious public, there is little appetite for denying, say, German chocolatiers or French perfume makers, vinegar distillers and auto manufacturers, the ability to sell and ship products to Russia — especially because so many of the items seem to have little bearing on the war itself.
“These are goods that are less linked to the conflict, so there may be less willingness for the EU to bear those costs,” said Niels Graham, who studies trade policy at the Atlantic Council and authored a new study of the G-7’s exports to Russia.
There is one technical fix that could make a difference. The G-7 countries may decide to invert the mechanics of the current sanction regime so that only non-sanctioned products are specifically mentioned and everything not referenced is presumed banned, according to two people familiar with the discussions. But even that idea is likely to face resistance.
“At this point in time, a total export ban is, for various reasons, not in the cards. Economically it’s just not feasible,” said Rachel Rizzo, a senior fellow at the Atlantic Council’s Europe Center.
“As time goes on, citizens in various countries, especially within the European Union, are concerned about the overall cost of the war in Ukraine. So, if the answer to a total export ban is creating a bunch of carve outs so various European countries can get on board, is it really worth it? Does it have the intended effect? That’s unclear.”
