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Sanctions and public opinion: The case of the Russia-Ukraine gas disputes

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Abstract

Economic sanctions usually fail, sometimes even provoking the opposite of the intended outcome. Why are sanctions so often ineffective? One prominent view is that sanctions generate popular support for the targeted government and its policies; an outcome referred to as the rally-around-the-flag effect. We quantify this effect in the context of a major trade dispute between Ukraine and the Russian Federation, which led to a cut in gas exports to Ukraine and a sharp increase of gas prices. Using individual data on political and economic preferences before and after the trade dispute and exploiting the cross section heterogeneity in the individual exposure to the price shock—measured by the connection to a centralized gas/heating system—we find that people more directly affected by the increase of gas prices were significantly more likely to change their opinions in support of Western-style political and economic systems preferred by the incumbent government, consistent with a rally-around-the-flag effect.

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Notes

  1. Though the Russian Government has never, to our knowledge, referred to the events in 2005 and 2006 as sanctions preferring to refer to them as legitimate commercial restrictions in response to trading partner’s misbehavior, the suspension of customary trade with Ukraine certainly took place and were associated with political aims, consistent with the classic definition of sanction in the literature (Hufbauer et al. 1990).

  2. The same percentage of success was confirmed by Hufbauer et al. (2007) when including economic sanctions episodes in the 1990s.

  3. Eaton and Engers (1992), Drezner (1998, 1999), Kaempfer and Lowenberg (1988, 1992), Kaempfer et al. (2004), Lacy and Niou (2004), Verdier and Woo (2011), among the others, provide theoretical discussions of the conditions under which a sanction can be either more effective or less effective.

  4. International conflicts, war and terrorist attacks are considered the most typical events triggering a rally-around-the-flag effect, which can suddenly increase the popularity of national leaders among citizens (Mueller 1973, 1993; Oneall and Bryan 1995; Baum 2002).

  5. For more examples of the direct effect of sanctions on well-being, see Barry (2000); Garfield et al. (1995); Peksen (2011).

  6. The Ministry was the largest gas extractor in the world in the early 1990s, a title the Russian firm still held in 2015.

  7. Replacing the company’s previous leadership with Dmitry Medvedev, then Putin’s political campaign manager, and Alexei Miller, another past associate.

  8. In 2012, residential subsidies amounted to about US$8.1 billion (UAH 65 billion), or 4.6% of GDP. Naftogaz provided a US$422 (UAH 3378) subsidy for every tcm of gas used for residential district heat. In 2012, this subsidy amounted to about US$3.75 billion (UAH 30 billion), or 2.1% of GDP. The Government also provides direct budget support to district heating companies for the difference between their costs and revenues. The estimated size of this support has been about US$0.6 billion (5 UAH billion) annually, or over 0.3% of GDP.

  9. In 2011, Yulia Tymoshenko was charged and found guilty of abuse of power and embezzlement relating to her 2009 gas imports contract negotiated with Vladamir Putin. She was cleared of these charges in 2014.

  10. Russian was spoken as a first language by about 30% of the population in 2001, according to the national Census.

  11. Indeed, the government’s refusal to sign the AA in 2013 was instrumental in setting off the Euromaidan protests that overthrew the government, and culminated in the conflict that followed.

  12. According to the EDB Integration Barometer, conducted by the Eurasian Development Bank of the Eurasian Customs Union, support in 2015 for joining the EAEU stood at just 19% in Ukraine

  13. Ukraine produces about 20% of its gas needs domestically.

  14. More leeway was given to countries that subsequently sold greater control of the gas transportation system to Gazprom, including Armenia and Belarus.

  15. Technical appendixes to this paper are available Review of International Organizations’ website.

  16. The survey also includes a question on voting intentions, which asks: “If the parliamentary election were held this coming Sunday, for which political party would you vote?” This question would allow for a test of the narrow rally-around-the-flag hypothesis as an increase of popular support for the targeted government and leaders. However, we cannot pursue this route because of large number of missing values: 50% of observations in the baseline (2004) survey and 40% in the 2007 survey. This is not completely surprising, given that this question is more direct and “personal” that those of political and economic preferences and therefore people are less likely to answer. A final complication is that the composition and positions of the parties changed between 2004 and 2007.

  17. Please see appendix C for full table of results

  18. The regression output can be interpreted by comparisons across groups. As such, one category of response is needed as a base against which comparisons are made. In all cases described, use the most popular “old soviet” response as the base category, for ease of interpretation.

  19. Village; urban settlement; small town (up to 20 thousand); medium town (20–99 thousand); city (100–499 thousand); large city (above 500 thousand).

  20. For details on the relatively low rate of non-response (attrition), please see Appendix B. Table 2 reports the definition and descriptive statistics for all the variables.

  21. The relative risk ratio (RRR) is the exponentiated coefficient of the multinomial logit regression and it is the ratio of risk of the event (the preference for a certain political/economic outcome) for the treated group (for instance, the one with the centralized heating system) over the risk of the event for the untreated groups (i.e. without centralized heating system). Hence, a RRR greater than one indicates that the treatment increases the likelihood of the given outcome, while the opposite is true id RRR < 1.

  22. As for the panel regressions, even in the cross-section results are robust to considering the central gas system as a measure of exposure to the trade dispute (see appendix table C3).

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Acknowledgements

The authors gratefully acknowledge financial support from IDE-JETRO. The authors are also grateful to Axel Dreher (the editor), three referees, Andrea Presbitero, and seminar participants at IDE and the World Bank for suggestions on earlier drafts.

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  1. CSEF, Naples, Italy

    William Seitz

  2. University of Naples Federico II, Naples, Italy

    William Seitz & Alberto Zazzaro

  3. MoFiR, Ancona, Italy

    William Seitz

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Seitz, W., Zazzaro, A. Sanctions and public opinion: The case of the Russia-Ukraine gas disputes. Rev Int Organ 15, 817–843 (2020). https://doi.org/10.1007/s11558-019-09360-2

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