Sanctions are failing: The West must close Russia's economic loopholes now and end the war in Ukraine

Last week, the US President attempted to pressure Vladimir Putin once more. He threatened to impose “sanctions and maybe tariffs, secondary tariffs” on Russia within the next “10 or 12 days” if Putin doesn’t back down.

Whether Trump will follow through on this threat remains to be seen. He has previously issued stern warnings to President Putin, only to back down.

Still, there is broad consensus that such sanctions – especially on countries buying Russia’s exports – could be a step in the right direction. In theory, they would squeeze the Russian economy and force Putin to the negotiating table.

Sanctions have long been the preferred tool of Western diplomats. Compared to traditional diplomatic efforts, sanctions are often more effective.

This is especially true when dealing with states like Russia, which routinely disregard the rules-based international order and show little concern for diplomatic isolation.

Sanctions are also generally preferable to military interventions. They don’t involve civilian casualties, and they don’t carry the risk of protracted conflicts. In the case of Russia, a direct military confrontation with the United States could have catastrophic consequences for the entire world.

For these reasons, sanctions are the best means available to democracies for pressuring those engaged in corruption or human rights abuses.

However, as our new report for the Henry Jackson Society highlights, sanctions are not without their flaws. Several key weaknesses, in particular, continue to undermine their effectiveness.

Chief among them, is Russia’s ability to redirect its trade towards countries like China and other non-aligned states. This enables its economy to weather the unprecedented sanctions imposed by the West. Russia’s shift has allowed it to remain resilient and, in turn, has weakened the intended impact of sanctions.

Another significant issue is the legal practice of distressed debt trading. This allows sanctioned entities to remain liquid by trading their debt on secondary markets – providing them with continued access to capital. It’s easy to see how this practice, albeit lawful, undercuts the sanctions regime.

Given the clear advantages of sanctions over military and diplomatic alternatives, our report argues that they must be urgently strengthened. Loopholes must be closed and enforcement must improve.

To achieve this, the report recommends that the Government sets up a new, dedicated sanctions regulator. This body would oversee how sanctions are applied, and monitor compliance. It would also step in when firms attempt to exploit legal loopholes. Its role would be both preventive and corrective – helping businesses understand the rules while also ensuring they aren’t sidestepping them. This regulator would work closely with other government departments and international partners to adapt to evolving threats and make enforcement more consistent and credible.

Sanctions have become the West’s most powerful tool for pressuring rogue regimes. Now is the time to make them sharper, smarter, and more effective.

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Dr Helena Ivanov is an Associate Research Fellow at the Henry Jackson Society and holds a PhD from the London School of Economics. She is a former Investment Associate at Bridgewater Associates.

Dr Theo Zenou is an historian with PhD from the University of Cambridge and is a Research Fellow at the Henry Jackson Society.

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