Russia: A Century Experience of Living Under Economic Sanctions

2024 Author: Seth Attwood | [email protected]. Last modified: 2024-01-16 18:34

Abroad, the most famous example of long-term unilateral sanctions is the US embargo against Cuba, which began in 1960-1962 and continues to this day. US companies are prohibited from any economic contacts with Cuba (including through third countries and through intermediaries) without special permission. According to the Cuban authorities, the direct damage from the embargo was about $ 1 trillion at current prices, but Cuba survived. Washington did not achieve its goals on the island.

The Russian experience is even richer. The Russian Empire was already under economic sanctions, then the sanctions continued to be applied against Soviet Russia. Today, sanctions are in force against the Russian Federation. That is, neither the state structure, nor the socio-economic model of development, nor Russia's foreign policy priorities change the attitude of the West towards it. Economic sanctions are a product of cultural and historical (civilizational) differences between the West and Russia, as F. M. Dostoevsky, N. Ya. Danilevsky, K. N. Leontiev, L. A. Tikhomirov, O. Spengler, St. Nicholas of Serbia and others.

For the first time, the United States unilaterally imposed economic sanctions against Russia in 1911, when it denounced the Russian-American trade agreement of 1832. The denunciation was provoked by the American banker Jacob Schiff, who tried to put pressure on the authorities of the Russian Empire, demanding an end to "infringement of the rights of Jews" (it was about restrictions on movement and places of residence for Jews who came to Russia from America for commercial purposes). Denunciation of the treaty meant that Russia was deprived of the status of a country that has most favored nation status in America. It was primarily about preferential rates of customs duties. True, the damage from those sanctions was mainly political, since America did not occupy a large place in the foreign trade of the Russian Empire.

The sanctions against Russia during the Soviet period of its history were incomparably tougher and more ambitious. First, they were collective; many Western countries took part in them. Second, they covered not only trade, but also transportation of goods, loans, investments, consulting, contracting, technology transfer, and movement of people. Thirdly, they were often supplemented by diplomatic and military measures of pressure and furnished with conditions of a political nature. The main purpose of the sanctions and other pressure measures was to return Russia to the bosom of the capitalist economy, consolidating its position as a colony or semi-colony of the West.

After the Bolsheviks announced that they were refusing the debts of the tsarist and provisional governments, the West immediately organized a trade blockade of Soviet Russia, which was supplemented by a naval blockade (especially on the Baltic Sea). The blockade intensified even more after the decree "On the nationalization of foreign trade" was signed in April 1918. The decree established a state monopoly of foreign trade, which finally deprived the West of hope for the continuation of the economic exploitation of Russia.

This decree can be seen as the first serious reaction to the blockade of the West. The state monopoly of foreign trade protected the Russian economy much more reliably than even high customs tariffs. European states and the United States refused to trade with Soviet state organizations, a few contracts were concluded only with those organizations that had a cooperative form of ownership (in fact, the Soviet state stood behind them). The trade blockade was complemented by a credit blockade (refusal to provide loans), as well as a gold blockade (refusal to supply goods to Russia in exchange for gold).

Attempts to normalize economic relations between Russia and Europe were made at an international conference in Genoa in 1922. The West once again demanded that the RSFSR recognize the debts of the tsarist and provisional governments (totaling 18.5 billion gold rubles), as well as the return of nationalized enterprises and assets belonging to foreign investors, or compensation for them. Once again, the issue of abolishing the state monopoly of foreign trade was also raised. On the last point, the Soviet delegation did not make any compromises. As for state debts, Moscow was ready for their partial recognition, but on condition that it received long-term loans from the West to restore the national economy. With regard to foreign enterprises, Soviet representatives declared that they were ready to invite the former owners as concessionaires, and put forward counterclaims to the West for compensation for damage caused by the trade blockade and military intervention. The amount of claims more than doubled the debt obligations on loans and borrowings from the tsarist and provisional governments. The negotiations are at an impasse.

It was then that the leadership of Soviet Russia realized for the first time that it was not only useless, but dangerous to rely on the restoration of pre-war trade and economic relations with the West. It was then that for the first time was born the idea of creating a self-sufficient economy (or at least an economy that does not critically depend on the external market and external loans). The concept of industrialization and the creation of an independent economy has been taking shape for several years. The West unwittingly helped the Soviet Union in this, without stopping sanctions against the USSR.

In the 1920s, the West faced great economic difficulties. Some countries (especially Great Britain) constantly looked towards Soviet Russia, realizing that it was in the east that they could find at least a partial solution to their problems (cheap raw materials and a market for finished products). The start of socialist industrialization in the USSR coincided with the onset of the world economic crisis (October 1929). The crisis weakened the united front of the Western countries against the Soviet Union, made it easier for him to conclude contracts for the supply of raw materials, agricultural products, the purchase of machinery and equipment for enterprises under construction. The Soviet Union also managed to obtain a number of loans, albeit not very long-term. During the years of the first five-year plan, such a form of attracting foreign capital as concessions (oil and manganese production) was used.

There was no complete lifting of anti-Russian sanctions even in the 1930s, when the West was in a state of economic depression. Thus, barriers to Soviet exports were repeatedly raised. In the United States, after President Franklin Roosevelt came to the White House, the Johnson Act was passed, which prohibited American banks from issuing loans and borrowings to countries that had not repaid their debts to the US government. The issuance of American loans to the Soviet Union and the placement of Soviet bond loans on the American market ceased.

In the second half of the 1930s. the center of gravity in the external economic support of Soviet industrialization passed from the United States to Germany. Contracts were signed for the supply of high-precision metal-working machines and other complex equipment. Moscow managed to get a number of fairly long loans from Germany.

Industrialization, interrupted by the war at the height of the third five-year plan, was given to the Soviet Union at a high price, but its main goals were achieved. For 11.5 years, 9,600 new enterprises were built in the country, that is, on average, two enterprises were put into operation every day. Among them were real giants, comparable in capacity with the largest industrial complexes in North America and Western Europe: Dneproges, metallurgical plants in Kramatorsk, Makeevka, Magnitogorsk, Lipetsk, Chelyabinsk, Novokuznetsk, Norilsk, Uralmash, tractor plants in Stalingrad, Chelyabinsk, Kharkov, Urals, automobile factories GAZ, ZIS, etc. Many enterprises were dual-purpose production facilities: in the event of a war, they were ready to quickly start producing tanks instead of tractors, armored personnel carriers instead of trucks, etc. length of 11, 2 km.

Industrial production in the period 1928-1937 (the first two five-year plans) increased by 2, 5-3, 5 times, that is, the annual growth was 10, 5-16%; increase in the production of machinery and equipment in the specified period 1928-1937. estimated at an average of 27% per year. Here are the indicators of the production volumes of some types of industrial products in 1928 and 1937. and their changes over the decade 1928 - 1937. (two five-year plans):

Product type	1928 g	1937 year	1937 to 1928,%
Pig iron, million tons	3, 3	14, 5	439
Steel, million tons	4, 3	17, 7	412
Rolled ferrous metals, million tons	3, 4	13, 0	382
Coal, million tons	35, 5	64, 4	361
Oil, million tons	11, 6	28, 5	246
Electricity, billion kWh	5, 0	36, 2	724
Paper, thousand tons	284	832	293
Cement, million tons	1, 8	5, 5	306
Granulated sugar, thousand tons	1283	2421	189
Metal-cutting machines, thousand units	2, 0	48, 5	2425
Cars, thousand units	0, 8	200	25000
Leather footwear, million pairs	58, 0	183	316

A source: USSR in figures in 1967. - M., 1968.

The country has made an incredible leap forward. For most indicators of industrial and agricultural production, it came out on top in Europe and second in the world. A truly independent, self-sufficient economy was created with a full set of interconnected industries and industries. It was a single national economic complex. Almost 99% of the Soviet economy worked for domestic needs, slightly more than one percent of the output was exported. Domestic needs for consumer goods and industrial products (investment goods) were covered almost entirely by domestic production, imports satisfied no more than 0.5% of needs.

It was a decisive response to the economic sanctions that had been in effect against the Soviet Union for over two decades. And this was a response to the military preparations of the West against the Soviet Union. A powerful defense industry was created, without which there would be no victory over Nazi Germany and its allies in World War II. Without such economic potential, the USSR would not have been able to restore its economy after the war in a few years (faster than Western European countries).

These successes were ensured by the very model of the economy, which was fundamentally different from the one that existed in pre-revolutionary Russia and the one that was in the West.

Here are the most significant features of this model related to the sphere of management and the formation of industrial relations in society at that time: 1) the decisive role of the state in the economy; 2) public ownership of the means of production; 3) the use of a cooperative form of economy and small-scale production in addition to state forms of economy; 4) centralized management; 5) directive planning; 6) a single national economic complex; 7) the mobilization nature of the economy; 8) maximum self-sufficiency; 9) orientation in planning primarily on natural (physical) indicators (cost ones play an auxiliary role); 10) rejection of the profit indicator as the main cost indicator, focus on reducing the cost of production; 11) periodic decline in retail prices based on a reduction in cost; 12) the limited nature of commodity-money relations (especially in heavy industry); 13) a single-tier model of the banking system and a limited number of specialized banks,14) a two-circuit system of internal monetary circulation (cash, serving the population, and non-cash circulation, serving enterprises); 15) the accelerated development of the group of industries A (production of means of production) in relation to the group of industries B (production of consumer goods); 16) the priority of the development of the defense industry as a guarantee of national security; 17) the state monopoly of foreign trade and the state currency monopoly; 18) rejection of competition, its replacement with socialist competition (which had a different essence); 19) a combination of material and moral incentives for labor; 20) the inadmissibility of unearned income and the concentration of excess material wealth in the hands of individual citizens; 21) ensuring the vital needs of all members of society and a steady increase in living standards. And also a large number of other signs and features of the then economic model: an organic combination of personal and public interests, the development of the social sphere on the basis of public consumption funds, etc. (1)

During World War II, the West began to view the Soviet Union as a temporary ally for some time. In the period 1941-1945. There was a lull on the front of economic sanctions, but after the West declared the Cold War in 1946, economic sanctions against the USSR were fully operational. Sanctions against the Soviet state continued until the collapse of the USSR in 1991. It is significant that they continued to act in relation to the Russian Federation as the legal successor of the USSR. For example, an amendment to the US Trade Act (Jackson-Vanik Amendment), passed by the US Congress in 1974, restricting trade with countries that prevent emigration and violate other human rights. It was adopted exclusively for the fight against the Soviet Union. The Jackson-Vanik amendment remained in effect until 2012, when it was replaced by the Magnitsky Act.

_

1) The reader can learn more about this economic model, about the economic history of Russia in the twentieth century, about economic sanctions and the economic war of the West against Russia (the Russian Empire, Soviet Russia, the Soviet Union, the Russian Federation) from my following books: “Russia and the West in the XX century. History of economic confrontation and coexistence”(M., 2015); "The Economy of Stalin" (Moscow, 2014); "Economic war against Russia and Stalin's industrialization" (M., 2014).