When Financial Statecraft Goes to War: Western Sanctions and Russian Reactions

By Sophie Lambroschini

Oleg Deripaska, President of United Company RUSAL until May 2018. Image by Dzinko, CC BY-SA 3.0 via Wikimedia Commons

The latest US round of sanctions hit Russian domestic markets like a missile strike early April: the effect was immediate and the conflagration unexpected. The announced ban on Russian steel magnate Oleg Deripaska’s United Co. Rusal and other assets (as well as on other Russian businessmen and officials suspected of aiding the Kremlin of “destabilizing activities” linked to US elections, Ukraine and Syria) sent the Moscow stock market into a tailspin unseen since the August 1998 crisis when investors pulled out. Even more destabilizing for Russia perhaps, is the US government’s offer to lift the ban if Deripaska were to relinquish control over Rusal, the world’s second largest aluminum producer[1]. If this happens – the holding company through which Deripaska controls Rusal in a complex scheme has indeed made statements to this effect[2] – would a western power have succeeded in intervening in Russia’s internal elite power balance? Indeed, Deripaska was “fired from his post as oligarch” by the US Department of the Treasury, a Russian political commentator quipped early on[3]. This prospect feeds speculation by Russian analysts that sanctions could split the elite over foreign policy, thus either reinforcing or destabilizing Putin’s regime[4].

Given the opaque and locked Putin power system, such a move can be seen as a targeted political strike, hitting the heart of the system through financial pressure. The US tactic can be defined as state-of-the art “financial statecraft”, or the use of financial instruments to achieve political or diplomatic goals, as defined by political economic Ben Steil[5]. It also throws the spotlight on finance as a territory of war. Indeed, the military analogy of missile strikes is not a stylistic effect, it is also at the core of the thinking behind Russian foreign financial policy: Moscow’s global economic and financial interests belong to its security, as laid out in a May 2017 presidential decree on a strategy of “Russian economic security”[6] and specifically cites “discriminatory measures” blocking access to “financial resources”, a transparent reference to the western sanctions policy following the annexation of Crimea and the Kremlin support of separatism in Ukraine, as threats to national security. Just three months ago the president of Russia’s VTB bank told fellow bankers during the Davos summit in Switzerland sanctions were “a full-fledged attack on Russia” depicting them as “economic war” with the goal to change its government[7].

In fact, acting in immediate retaliation to the Deripaska sanctions, Russian parliament had been asked to expand 2015 legislation on so-called “undesirable organizations” (currently applied to political opposition groups) to any company threatening Russian “economic security” or “foreign political interests”. This would result in a de facto ban[8]. While it is too early to speculate about the political consequences of a hypothetical relinquishing by Deripaska of control over Rusal, it is the right time to bring into focus Russia’s understanding of economics and finance as a national security issue, seen in the broader context of financial nationalism. This will open new avenues to understanding how the Russian elite interacts with the global world when it comes to money.

Sergei Gorkov, Former Chairman of Vnesheconombank. Image by Chechais, CC-BY-SA-4.0 via Wikimedia Commons

Of course, the Russian government is no stranger to financial statecraft itself. It benefited from experience garnered during the Cold War when Soviet bank managers working on western markets were summoned by the Politburo to raise foreign currency capital in face of falling oil prices, fluctuating currencies, and US president Ronald Reagan’s policies to make Soviet borrowing abroad complicated and expensive. Some of these financial frontline cold warriors are still in place: Andrey Akimov, 65, for example, is Chairman of the management board of Gazprombank. In 1988 he was part of close-knit transnational team that set up the USSR’s very first private placement offering, selling Russian state bank securities to targeted investors. Or Sergey Gorkov, 50, until recently Chairman of the state-owned Bank for Development and Economic Affairs (Vnesheconombank), a bank used in the past by the Kremlin as a slush fund to finance pet projects or to bail out needy banks. Gorkov, whose name is associated with US president Donald Trump’s son-in-law Jared Kushner whom he met ahead of US elections, is a trained security services officer. He served as a top executive in several leading Russian banks over the past twenty years (Menatep, Sberbank). When Gorkov took over the chairmanship of Vnesheconombank in 2016, its New York City office had been at the heart of a spy scandal. A year earlier, an FBI sting operation led to the arrest (and successful prosecution) of Evgeny Buryakov who pled guilty to being a Russian foreign intelligence agent working under the cover of Vnesheconombank. Buryakov had been caught while collecting intelligence on US sanctions policies and trading systems used on the New York Stock Exchange.

Vnesheconombank Headquarters in Moscow. Image by A. Savin, CC-BY-SA-3.0 via Wikimedia Commons

Earlier, the 2013 15-billion dollar loan to Ukraine by Russia that served as a tipping argument to win Kyiv over to the Russian-led Customs Union against the Association agreement with the European Union is a case in point of the power of financial statecraft: it convinced Ukrainian president Yanukovych to make a geopolitical about-face, reversing long-standing pro-EU policies, public opinion, and even the positions of his own ruling oligarchy and thus setting off a sequence of events that would result not only in his Maidan-led demise, but to the Russian annexation of Crimea, intervention in Ukraine, and general spike in East-West confrontation.

However, Russia’s most ambitious financial statecraft projects were more strategic in scope than simply including Ukraine in the Eurasian Customs Union: they go back to 2006 when foreign policy action was diversified through proactive investment banking and the development of a “multipolar” financial world through the cooperation of five rising powers (Brazil, Russia, India, China, and South Africa) as an informal “club” and the Shanghai Cooperation Organization, for the purpose of countering the dominance of the United States and the US dollar over financial markets[9]. These plans were curtailed by the 2008 crisis: suddenly, Russian state investment banks and other vehicles lacked the capital to fuel the planned expansion.

While financial statecraft is practiced the world over, these policies of financial statecraft are representations of financial nationalism. Financial nationalism can be loosely defined in a Central-Eastern European context as a posture and policies hostile towards international financial organizations (such as the International Monetary Fund and the European Central Bank), and protectionist in nature, claiming to buffer domestic markets and currency against global “destabilization”[10]. This financial nationalism is part of the broader anti-western ideological framework, mobilized to various degrees by governments in Russia, Hungary,  Poland over the past years and, more recently though to a lesser extent, by Ukraine. Financial nationalism often – though not necessarily – goes hand in hand with “illiberal”-type of claims to the pursuit of an “own path”, distinct from European or more broadly western liberal values (in both economic as well as political terms). In the case of Russia, Vladimir Putin increasingly used state control over financial flows to channel its influence and policies abroad. He may be defined as an example of a financial nationalist.

For Russia, the 2008-09 crisis did not mean the end of financial nationalism: it didn’t disappear in 2008, rather adapting to new realities. The 2008 market crisis represented a watershed moment in terms of reframing the Russian foreign financial policy rhetoric as an argument in favor of a foreign economic policy prioritizing Russian “national interests” and condemning “neoliberal” economics as western-led and destabilizing. At the same time, many of Russia’s financial policies were financed on global markets, of which, beyond Russia’s nationalist rhetoric, it is an important player.

So what does financial statecraft have to do with Russian national security? The Russian strategic framework is holistic in nature: it includes economics and finance in its national security doctrine. Economics and finance are both a dimension of Russian (much-obsessed-over) “sovereignty” and used both as offensive and defensive weapons (as the rich literature on Gazprom’s international policies a decade ago already illustrated). Decrypting Russia’s interpretation of “financial statecraft” uncovers the less obvious elements underlying Russia’s relations with the west, and also the non-western world. Indeed, over the past two decades, Russia has developed a complex multi-layered strategy: measures echoing anti-western “financial nationalism”, cohabitated with dynamic ambitions to take part in global conversations (G8, IMF…). Looking at how Russian financial actors behave internationally – what kind of practices (offshore investment, cryptocurrencies, regional alliances) they develop – is an object of research itself. A first step – proposed here – is to map some of the ideas and concepts around Russian foreign financial actions as financial statecraft, sometimes but not exclusively reflecting aspects of financial nationalism.

Vladimir Putin’s next term in office – he was inaugurated May 7 – will most probably continue to be dominated by foreign policy issues most of which he set in motion himself (the annexation of Crimea, intervention in Donbas, Syria, the Skripal poisoning)[11]. Transnational interactions with other contenders of financial nationalism in East-Central Europe could effectively throw some light on the relationship between financial nationalism and globalized finance. The present climate of economic warfare (also exemplified by US president Trump) calls for closer scrutiny, considering the growing significance of sanctions and other punitive measures as an instrument affecting not only the Russian economy but also its ruling elite, and thereby the political system of the country.



Sophie Lambroschini has earned her PhD in Slavic Studies and has been an Associate Researcher at the Centre Marc Bloch in Berlin since October 2015 after long stays in Russia (1994-2004) and in Ukraine (2005-2015). She defended her doctoral thesis at the Université Paris-Nanterre in February 2018 on the history of the financial Cold War and its post-Soviet legacy. Publications include the book Les Ukrainiens: Lignes de vie d’un peuple (Ateliers Henry Dougier, 2014), the book chapter „Post-Empire. La Russie au miroir de son voisinage“ with J.-R. Raviot in Une nouvelle Guerre froide?, (Ed. La Documentation française 2016), the articles “Civiliser l’oligarchie – une condition à la stabilisation de l’Etat ukrainien” (Note de recherche stratégique 6, IRSEM, 2014), and “Ukraine : La  colonisation économique russe, mythe ou menace?” (Fondation Robert Schuman, 2011).




[1] https://www.wsj.com/articles/rusal-set-to-escape-sanctions-after-treasury-amends-russia-blacklist-1525217278, last accessed 23/05/18; https://www.ft.com/content/b98bbe8c-4a31-11e8-8ae9-4b5ddcca99b3, last accessed 03/05/18.

[2] https://www.bloomberg.com/news/articles/2018-05-18/deripaska-takes-first-step-to-reduce-influence-over-en-rusal, last accessed 04/05/18.

[3] https://www.novayagazeta.ru/articles/2018/04/07/76093-minfin-ssha-uvolil-deripasku-i-vekselberga-s-posta-oligarhov, last accessed 23/05/18.

[4] http://www.ng.ru/world/2018-04-06/1_7206_sanctions.html?print=Y, last accessed 23/05/18; https://carnegie.ru/commentary/76198, last accessed 23/05/18.

[5] Steil, Ben, Litan, Robert, 2008. Financial Statecraft: The Role of Financial Markets in American Foreign Policy. Yale.

[6] http://static.kremlin.ru/media/acts/files/0001201705150001.pdf, last accessed 23/05/18.

[7] https://ria.ru/economy/20180124/1513209710.html, last accessed 23/05/18.

[8] https://www.vedomosti.ru/politics/articles/2018/04/18/767011-genprokuratura-nezhelatelnih-organizatsii, last accessed 23/05/18.

[9] Roberts, Cynthia A., Leslie Elliott Armijo, and Saori N. Katada. 2018. The BRICS and Collective Financial Statecraft. Oxford University Press.

[10] See for example: Juliet Johnson, and Andrew Barnes. 2015. “Financial Nationalism and Its International Enablers: The Hungarian Experience.” Review of International Political Economy 22 (3): 535–69; Rutland, Peter. 2016. “The Place of Economics in Russian National Identity Debates.” In The New Russian Nationalism, 336–61. Imperialism, Ethnicity and Authoritarianism 2000–2015. Edinburgh University Press. http://www.jstor.org/stable/10.3366/j.ctt1bh2kk5.19, last accessed 23/05/18.

[11] https://www.vedomosti.ru/politics/articles/2018/04/18/767011-genprokuratura-nezhelatelnih-organizatsii, last accessed 23/05/18.



Citation: Sophie Lambroschini, When Financial Statecraft Goes to War: Western Sanctions and Russian Reactions, in: TRAFO – Blog for Transregional Research, 30.05.2018, https://trafo.hypotheses.org/10301


Forum Transregionale Studien

The Berlin-based Forum Transregionale Studien is a research organization that promotes the internationalization of research in the humanities and social sciences. The Forum provides scope for collaboration among researchers with different regional and disciplinary perspectives and appoints researchers from all over the world as Fellows. In cooperation with universities and research institutions in Berlin and the rest of Germany, it carries out research projects that examine other regions of the world and their relationship to Germany and Europe systematically and with new questions.

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