This article was initially drafted for a Perry World House conference on “The Intersection of Sanctions and Corruption,” which was made possible in part by a generous grant from Carnegie Corporation of New York. The views expressed are solely the author’s and do not reflect those of Perry World House, the University of Pennsylvania, or Carnegie Corporation of New York.
As Russia’s full-scale war against Ukraine enters its fifth year, U.S. and EU sanctions against Russia have become a source of growing debate and division among Western leaders. Sanctions have failed to achieve the aim of imposing such high costs on Russia that President Vladimir Putin seeks to cease military aggression and end the war. U.S. President Donald Trump’s approach to negotiating with Russia to end the war has cast further doubt on the utility of sanctions. Despite Moscow’s continued demands for maximum territorial, military, and political concessions from Ukraine, the Trump administration has weighed not only lifting U.S. sanctions but also re-engaging Russia as an economic partner and jointly developing multi-billion-dollar commercial projects.
Today, sanctions occupy a central place in U.S. foreign policy. They are both executive-driven and congressionally mandated. They are bipartisan. And they are durable, even sticky. In Washington, the use of sanctions has become a reflex: a default instrument deployed in response to aggression, corruption, cyber-attacks, human rights absuses, and broader geopolitical destabilization.
Yet the case of Russia illustrates how sanctions do not constitute strategy. Even Trump’s willingness to lift sanctions and use more economic carrots has, to date, failed to incentivize Putin to adjust his maximalist negotiating position. Putin continues to delay meaningful negotiations to achieve peace in Ukraine, repeatedly asserting that the “root causes“ of the conflict must first be eliminated. His framing reflects a revanchist narrative in which Ukraine is depicted as historically belonging to Russia and Western support for Ukrainian sovereignty is cast as an existential threat.
In the meantime, the impact of U.S.-Israeli military action against Iran and instability in the Strait of Hormuz on global oil and gas markets adds new uncertainty to U.S. sanctions policy towards Russia. To avoid further supply disruptions and surges in oil prices, the Trump administration has unilaterally eased certain sanctions on Russian oil sales and provided a windfall to Russia’s stagnant and ailing economy. Specifically, the U.S. Treasury Department has issued sanctions waivers permitting limited transactions involving Russian oil exports already in transit, effectively allowing the release of otherwise “stranded” cargoes to global buyers under specified conditions.
Generally, sanctions policy should be integrated into a broad U.S. national security framework — one that aligns sanctions with military, diplomatic, intelligence, law enforcement, and economic statecraft objectives.
U.S. Sanctions Policy towards Russia from 2012 to Present
Starting in 2012, U.S. sanctions policy towards Russia has been shaped by a range of factors and objectives. A key tool is the 2012 Magnitsky Act, which targets Russian officials for significant corruption and human rights abuses. Following Russia’s annexation of Crimea and support of paramilitary activities in Eastern Ukraine in 2014, U.S. sanctions were significantly expanded in nature and scope. Particularly since Russia’s full-scale invasion of Ukraine in February 2022, the United States and the European Union have constructed extensive sanctions regimes aimed at compelling Moscow to end its aggression and increasing the economic and political costs of the war.
Since 2012, then, the central premise underlying sanctions towards Russia has evolved from punishing individuals and entities responsible for violations of international law and human rights, to penalizing military aggression against Ukraine, to deterring further aggression, to degrading Russia’s ability to finance and sustain its military operations in Ukraine.
Importantly, sanctions towards Russia have been shaped in an environment in which the United States was either unprepared or unwilling to act militarily to prevent, deter, or counter Russia’s military aggression towards Ukraine. In the face of Russia’s 2014 annexation of Crimea and 2022 expansion to full-scale war against Ukraine, the United States has adopted a policy not to engage Russia militarily directly on Ukraine territory; instead, it has opted to rely on select efforts to help arm and equip Ukraine with weaponry, materiel, and supplies. The supply efforts, in turn, have been shaped by a goal to avoid escalating the conflict with Russia.
Having set this policy course, the United States has by default become deeply reliant on sanctions – and economic coercion more broadly – to counter Russia’s invasion of Ukraine. While sanctions have proliferated, they have not been embedded in a coherent strategy of economic statecraft toward Russia, including a broader negotiating framework, with understood objectives and credible pathways toward relief.
Sanctions and Economic Statecraft
Economic statecraft is intended to achieve end states that benefit U.S. national security through more fair and balanced trade, expanded access to foreign markets, stronger protections for American business and entrepreneurs, and more market predictability and stability. To strengthen security, U.S. economic power should be applied in multiple ways, including not only coercion, but also positive incentives for more robust trade and investment, access for U.S. companies in strategic sectors, such as energy, critical minerals, and infrastructure, and new partnerships with entrepreneurs in emerging tech.
U.S. sanctions towards Russia are administered primarily by the U.S. Treasury Department’s Office of Foreign Assets Control and the U.S. Commerce Department’s Bureau of Industry and Security under several legal authorities, such as the Countering America’s Adversaries Through Sanctions Act. These measures include asset freezes, sectoral sanctions, travel bans, financial transaction restrictions, and export controls on critical technologies and goods. In 2025, the U.S. expanded its sanctions to target Russia’s largest energy firms, Rosneft and Lukoil, aiming to cut off revenue to the Kremlin’s war machine. Many Russian banks and entities that enable illicit finance are on U.S. sanctions lists to impede access to international financial systems and cut off avenues to evade sanctions.
Economic statecraft should be whole-of-government, incorporating the equities, policies, tools, and leverage of the departments of State, Commerce, Treasury, and Justice as well as the International Development Finance Corporation, Export-Import Bank, and Trade Development Agency. But solving this issue will not be simple, even with effective interagency coordination.
The Complicating Factor of Systemic Corruption
The policy challenges of how to use sanctions towards Russia to end the war in Ukraine are multiplying. What are the scenarios in which sanctions against Russia can and should be increased to maximize leverage? What are the scenarios in which sanctions can be eased or lifted to end hostilities, stabilize the environment, and build conditions for sustainable peace? Which types of sanctions should be lifted, in what sequence, and with what specific compliance benchmarks and goals, e.g., ceasefire, troop withdrawal, disarmament? At what point in the war termination and peace-building process does re-engagement with Russia on trade and investment become effective, plausible, or desirable?
A key factor compounding the policy conundrum is that corruption in Russia is systemic. Russia threatens U.S. national security by exporting corruption and using it strategically to undermine democratic institutions and the liberal international order. In response, sanctions have become a weapon of lawfare: a broader contest over the rule of law, governance models, and the integrity of global markets. But systemic corruption cannot, in effect, be sanctioned.
Further, Russia’s invasion of Ukraine was a war of choice. The Kremlin’s decision to attack a sovereign nation in the middle of Europe in the 21st century was rooted, in part, in systemic corruption that drives Russia towards aggression — against Ukraine, against the international liberal rules-based order, and against democracy itself.
The threat posed by Russia today to international security is rooted in the end of the Cold War and dissolution of the Soviet Union in 1991. As the Berlin Wall fell and the Soviet Union was dissolved, the West was sure that capitalism had prevailed over communism as the optimal way to organize and grow economies. We were convinced that reforms to instill free markets, free trade and privatization would inexorably create private property and demand for laws and institutions to protect this property.
But Russia moved in a different direction, towards an oligarchic capitalist model. The transition was shaped by strong feudal traditions, from pre-Soviet times, when Russian tsars and their anointed boyars controlled the nation’s wealth by extracting rents from peasants, prohibiting ownership of private property and controlling growth of modern industry.
Russian reformers and their supporters in the West who wanted a rule of law encountered something else entirely: the “iron law of oligarchy“ — the practice that powerful, connected, networked groups are not only above the law; they are entrenched in the institutions of governance and, in a word, “dictate” the law.
As the world is now witnessing, Putin and his oligarchy could not be contained within their own borders. Following the iron law, they had to expand and operate transnationally. They need to sell commodities on global markets, launder finances, hide assets, invest in real estate, and create companies abroad. They need to legitimize and consolidate political control at home by asserting their power abroad.
Russia initially invaded Ukraine in 2014 partly in response to Ukraine’s Revolution of Dignity. Ukrainians took to the streets of the Maidan in Kyiv to protest then-President Victor Yanukovych’s decision to reverse the nation’s course to join the European Union and trade with the world’s largest economic bloc. For Putin’s oligarchy, Ukraine’s accession to the European Union was the economic equivalent of joining the North Atlantic Treaty Organization. When the 2014 Maidan protestors forced Yanukovych to flee to Russia, the Kremlin reacted with military force and annexed Crimea and occupied the Donbas region in eastern Ukraine.
But Russia could not stop Ukraine’s Revolution of Dignity, which led to the election of the anti-corruption candidate Volodymyr Zelenskyy as president. Though painstaking, Ukraine began to dismantle oligarchic structures and replace them with independent institutions. It confronted malign actors, including sanctioning the Kremlin’s main local proxy, media mogul, and member of parliament, Viktor Medvedchuk. Ukraine was becoming an independent self-governing democracy and a prosperous economy right on Russia’s border.
Ukraine’s progress towards building an economy driven by the private sector based on rules posed a serious threat to President Putin. The Kremlin state-sponsored oligarchy was driven to expand and depended on exerting influence over neighboring economies to sustain its model. While public dissatisfaction within Russia over Vladimir Putin’s failure to modernize the economy grew, Ukraine’s expanding civil society and entrepreneurial dynamism offered a competing model that not only undermined the Kremlin’s economic approach but also called into question the legitimacy of Putin’s rule.
Putin’s decision to expand Russia’s invasion of Ukraine in February 2022 was a drastic escalation of his regime’s campaign against post-Maidan Ukraine. The law itself had become a strategic battleground between a legal framework that dismantles corruption on the one hand, and one that actively enshrines and protects it on the other. Lawfare is, in essence, a battle between the rule of law and the iron law of oligarchy. In Ukraine, this lawfare turned into a hot war.
President Trump seems to recognize that Russia’s failure to modernize and fundamental economic weakness are a source of power and leverage for the United States. Putin’s envoys repeatedly request lifting of U.S. sanctions and export controls, and promise access to Russian energy and critical minerals. In response, the Trump administration calibrates negotiations to stop using sticks and start using carrots. Broadly, the administration justifies this approach to de-couple Russia from its growing economic dependency on China.
To genuinely address root causes of the war in Ukraine, however, the United States must accept and address systemic corruption in Russia as a threat to national security. The war signifies Russia’s failure in the first instance to modernize, to build human capital, infrastructure, governance — all the things that make a country successful and peaceful and stable.
Today, as the war grinds on, Russia’s structural incapacity to modernize economically is even more deeply embedded. Russia has become a wartime economy that depends on government spending on the defense and military at expense of all other sectors. The goal of Putin and his oligarchy is not economic growth but political control and patronage. As implausible as it may seem, gaining the peace in Ukraine and Europe will require de-oligarchizing and dismantling Russia’s wartime economy.
The challenge, therefore, is not whether or how to scale up or to phase out U.S. sanctions towards Russia. At this stage, sanctions policy can only be rendered effective as an integrated part of coherent economic statecraft — one that defines national security objectives based on the accurate diagnosis of the root causes of Russia’s continued war against Ukraine.
Absent that integration, sanctions will remain an end in themselves rather than a means to an end. Sanctions can constrain. Economic statecraft, properly designed, can shape.
