Megara, a little-known town in western Greece, holds the honor of being the world’s first recorded victim of financial warfare. In 432 BC, the Athenian empire sanctioned Megara, excluding it from trading with Athens-allied ports and markets, to punish the town for allying with the Spartans. The Athenians’ refusal to accede to the Spartan demand for the sanctions to be withdrawn is believed, by many, to have led to war. Since then, financial warfare -- in the form of sanctions, embargoes, and asset freezes -- has become a frequent tool of statecraft. But arguably, the concept has never before been put to the test as it is now in Russia.
Sanctions are normally twinned with the threat of force. For example, in addition to severe international sanctions, Iran has always had the possibility of an Israeli strike looming over its head. But the sanctions regime imposed on Russia by the United States, Canada, and the European Union is bereft of its sibling. No one seriously expects the outside world to respond to Russia’s actions in Ukraine with violence and so, perhaps for the first time, sanctions have been left on their own. Since they have not forced Russia to immediately withdraw from Ukraine, some commenters, including former Cold War West German Chancellor Helmut Schmidt, have derided them as toothless and failing.
Yet unlike the case of Iran, where the goal was to force it to de-escalate its nuclear program as quickly as possible, with Russia, the world can take time to tighten the screws. The goal is not to freeze the assets of individuals or immediately change their behavior but to fully undermine Russian President Vladimir Putin, whose power and legitimacy flows from Russian economic success. Creeping sanctions can target Russia’s trading connections with the West, its use of the global capital markets, and its reliance on the international banking system one by one. That will sow uncertainty about Russia’s financial future and will be more palatable to