When Russia invaded Ukraine in 2022, Western countries responded with aggressive economic restrictions, freezing Russia’s official foreign exchange reserves, placing export controls on critical technology, and sanctioning scores of its political, military and business leaders. Yet more than four years later, the war is still going on, and Western sanctions have inflicted only limited pain on the Russian economy. Russia continues to trade oil and other commodities, recently receiving a massive windfall as the closing of the Strait of Hormuz caused global oil prices to soar. These profits are raising the government’s tax revenue at a critical time, helping it fund the war in Ukraine and stabilize the country’s financial markets. If sanctions were looking ineffective before, Russia’s economic rebound since the start of the United States’ and Israel’s war with Iran have only strengthened that perception.

But it is wrong to write off sanctions as a policy tool. When Western policymakers portray them as a wasted effort or counterproductive, their governments are playing right into Moscow’s hands. And they are discounting the enormous strain that sanctions could still place on the Russian system if properly enforced. By reducing the flow of hard currency into Russia, sanctions have the potential to send the ruble into a spiral of depreciation, which in turn would send inflation soaring and destabilize the country’s broader economy.

It is not too late to make sanctions effective. One-fifth of Russia’s GDP is directly linked to oil and gas extraction, and exports account for nearly one-third of government revenues. Russia evades Western oil sanctions primarily by using a shadow fleet of oil tankers, and that fleet is vulnerable to European pressure. It passes through European-controlled waterways, replenishes its numbers with European-owned ships, and can be forced to engage with a Western-dominated insurance industry. All of this gives Europe the power to restrict the fleet’s operations, and thereby drastically reduce Moscow’s ability to finance its ruinous war.

THE RISE OF THE SHADOW FLEET

The sanctions that the United States, the European Union, the United Kingdom, and Canada placed on Russia in early 2022 ran the gamut. They included export controls on sensitive goods such as semiconductors, computers, and lasers as well as the freezing of Russian foreign exchange reserves held by Western central banks. Yet efforts to curtail Russia’s oil exports back then were limited. The world economy was still rebounding from the COVID-19 pandemic, oil demand was strong and rising, and Russian oil accounted for roughly one-tenth of global supply. Western countries did not want to drive up prices by embargoing Russian oil, but the mere fear that they might do so caused oil prices to surge anyway, delivering enormous profits to Moscow. Russia’s current account surplus, or the amount by which its export receipts exceeded its import payments, soared to an all-time high of $235 billion in 2022. Within one year, Russia had nearly recouped the foreign exchange reserves that were frozen by Western countries.

Western countries needed to figure out a way to prevent Moscow from generating large amounts of cash from oil exports without causing global prices to spike. Many oil and commodity analysts worried that any attempt to take Russian oil off global markets could lift crude prices from their prewar baseline of around $75 per barrel to $200 or higher, allowing Russia to make enormous profits from its remaining exports even if the volume of exports were lower. Such a........

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