Sanctions revolution: The economy has a lot of catching up to do, but little time

We are all experiencing an economic revolution these days: The Western sanctions against Russia are not only the most complicated sanctions of all time, but – depending on what you look at – probably also the most extensive.

Always informed: The course of the war in Ukraine in the ticker – shelling near Chernobyl – Ukraine politicians: “Russians only have two options – death or surrender”

In fact, sanctions are one of the most amazingly successful products in our recent history. The reason for the success is rarely appreciated. It is the prevention of war. Sanctions are a substitute for war. They divert political pressure, directing political debate away from military disputes and into a legal sphere. law instead of violence. A tremendous success. Anyone who does not appreciate him thinks unhistorically. That’s why it’s such a pity when you only look at the immediate effect, i.e. whether sanctions put the aggressor in his place – or how quickly they do it. And because fewer and fewer voters, politicians and the military in the West accept war as a political tool, the triumph of sanctions will not only continue, but intensify.

Exceeding the sanctions: I’m allowed to do that, but I still don’t do it

But where is the revolution? It’s not just the crowd. Even if the complexity of the sanction packages has now reached a level at which even large legal and compliance departments, worldwide, by the way, have taken a remarkably long time to even sort through and understand the thicket. But entrepreneurs are familiar with “a lot” of regulation. It’s a constant problem.

–

The sanctions revolution lies elsewhere, namely in the relationship between law and politics. Companies that, like in the past, only see sanctions as a right, i.e. only as a legal requirement or prohibition, are currently unable to act. Sanctions are rightly understood and treated as part of the political culture by business these days. That sounds like a university seminar, but it has very practical implications. The first, which we already see everywhere, is what lawyers call overachievement. That means I’m allowed to do it, but I still don’t do it.

Surf tip: Economy and the Ukraine war – companies follow sanctions that don’t even exist – now the ripple effect is threatening

Such risk decisions out of caution have always existed. It’s not just the size that’s new. This has become so big that we in Germany are clearly moving in the direction of a total embargo on Russia these days – which no western state has legally ordered. The reason for the over-fulfilment is that the companies see the sanctions not only as a right, but as a political mandate. So what is new is how strongly political the risk considerations have become.

The PR department is best at assessing reputational risks

Over-achievement is the hallmark of the sanctions revolution. But it goes much deeper. Since sanctions are no longer just regulations, they can no longer only be understood and classified by the legal or compliance department. However, the usual procedure is still that regulatory problems – if at all – move from department to department one after the other. This is fatal, especially for the usually large crater for corporate communication. It is perhaps the most important function in any company right now. She can professionally assess the reputational risks associated with Russia. But in the current sanctions tsunami, she urgently needs legal input – not afterwards, not before, but constantly.

In my opinion, this is where it lies real Sanctions revolution: It is our duty to no longer see these perspectives in the German economy, in corporations, in medium-sized companies separately, but together, uniformly and at the same time. This is completely new, often requires new structures and is therefore also a revolution that could go far beyond the sanctions phenomenon.

Sanction risks: The German economy has a lot of catching up to do, but little time

Will the sanctions revolution have winners and losers? Surely. Every upheaval has them. Sanctions can lead to considerable damage for bystanders. To what extent the state has to compensate for this has been one of the most exciting legal questions since Corona. It is far from clear, especially not by the Federal Constitutional Court. The triumph of sanctions will also, almost automatically, lead to the expansion of state intervention and the question of the rights of the sanctioned. Now is not the time for broad public discussions on this. We must send clear signals to Moscow. But at some point we in Germany will have to take a closer look at these international law and constitutional questions of the sanctions revolution out of special responsibility.

And the winners? It will be those companies that recognize the potential threat from the traditional view of sanctions as mere, annoying “regulations” and that overcome this thinking. Building new units that examine law, reputation and risk in a unified way. Those who primarily build up internal knowledge on the highly complex subject of sanctions. The German economy has a lot of catching up to do here, but little time to act. The next sanctions are coming soon and they do not grant a rookie bonus or cooling off period. In that they are still very old-fashioned right.

–