Australia has vowed to keep ratcheting up sanctions in response to Russia’s invasion of Ukraine – but it has virtually zero economic leverage over Moscow.
Trade figures make that clear: Australia was 94th on the list of Russia’s main export destinations before the pandemic upended the world, which the Department of Foreign Affairs and Trade rounded down to 0.0% of Russia’s exports.
Australia was 47th on the list of Russia’s import sources. In both directions, Russia’s most significant trading partners are China, the United States and European countries.
This tends to explain why the head of Treasury advised Scott Morrison’s national security committee earlier this week that Australia could expand sanctions “with minimal impact on Australian businesses”.
“Australia’s trade with Russia is essentially negligible from both countries’ point of view in a big strategic sense,” says Dr William Stoltz, from the Australian National University’s national security college.
“So our sanctions have to be part of a larger global effort really to close off Russia’s economy from the world.”
Australia began by imposing travel bans and targeted financial sanctions on eight members of the Russian Federation’s security council, on the basis that this group had backed the false pretext for sending troops into Ukraine.
This body, chaired by Vladimir Putin, has 12 permanent members including the foreign minister Sergei Lavrov. But Lavrov was not included in the sanctions that took effect early Friday morning (nor was Putin). The eight targeted members included Dmitry Medvedev, who is deputy chair of Russia’s security council and was previously president and prime minister.
The second round of sanctions – which also took effect on Friday morning – targeted another 25 officials including Anton Vaino, chief of staff of Putin’s Presidential Executive Office, along with military commanders and deputy defence ministers. Four military contracting firms were also targeted.
The government has also moved to curb business with a number of Russian banks and Morrison said on Friday the next targets will be more than 300 members of Russia’s parliament that rubber-stamped the invasion, along with Russian oligarchs. The names of the oligarchs targeted have not yet been released.
Experts don’t believe there’s much more Australia can do in the sanctions space.
“Russia has been hardening itself to economic sanctions over the past 20 years,” Stoltz says.
“And it’s clearly evident from Putin’s behaviour in the last couple of days that he does not care about the economic hit that his country will take,” he says. While that might change as the US, Europe and the UK continue to raise the economic costs, he says “economic sanctions alone are not enough”.
Australia exported $723m in goods to Russia in 2019-20, including live animals, specialised machinery and meat, according to data compiled by Dfat.
In that same year, Australia imported $250m in goods from Russia, such as fertilisers ($71m) and crude petroleum ($59m).
Curbing imports such as crude petroleum may have to be “on the table” for discussion, says Stoltz, but importers may also be weighing up those growing risks.
“If you were a business in Australia doing business with Russia, I think on your own volition you’d be looking for other opportunities. It’s all just too uncertain.”
Australian superannuation funds are also weighing up the impact of the crisis.
“At UniSuper we have no direct exposure to Russia or Ukraine,” says its chief investment officer, John Pearce.
“However, like every other fund we are exposed to the impacts of higher energy prices. It’s pretty clear that the invasion has contributed to a perfect storm [of higher inflation and interest rates] that had already engulfed markets.”
Morrison said on Friday that Australia was playing its part alongside countries that had bigger economic stakes in Russia to “demonstrate very forcefully that we are all working together to shut Russia out as a result of their violence and their unlawful actions”.
But Morrison and the opposition leader, Anthony Albanese, both took aim at China after a report said it was fully opening up to Russian wheat exports, which had previously been subject to health-related restrictions.
Australia is basically playing a supporting role, rather than a lead role, in the sanctions effort.
“And that’s ultimately why China’s refusal [to add to the pressure] is so problematic in terms of getting a unified international response,” Stoltz says, “because you have to have no safe haven, essentially, and at the moment there’s a big one.”
Additional reporting by Paul Karp
