Less than 24 hours after Russia ordered the deployment of military forces to eastern Ukraine, the West has sent a clear message that Moscow’s aggression will not go unanswered.
But the toughest sanctions can be held in reserve, as a deterrent to further escalation.
Germany suspended certification of the Nord Stream 2 pipeline on Tuesday, the strongest move so far to impose economic and financial penalties on Russia since President Vladimir Putin recognized two parts of eastern Ukraine as independent and ordered their troops to enter the separatist territories.
The United States and the European Union have announced sanctions, and officials say further measures will be announced later on Tuesday.
Western countries are unlikely to send their own troops to Ukraine, making sanctions the best tools for punishing Moscow — and preventing further aggression.
Here’s what the West has done so far and how it can really hurt Russia.
The United States
The White House announced new sanctions on parts of eastern Ukraine that Putin recognized as independent on Monday.
But these penalties are mostly symbolic and do not pose much of a risk to the Russian economy.
The Biden administration will impose additional sanctions on Russia in the coming hours, Deputy National Security Adviser Jon Finer said during an appearance on MSNBC.
But he made it clear that more severe penalties are likely to be withheld to prevent Moscow from ordering troops deeper into Ukraine.
“If Russia takes more action, we will have more significant and serious consequences that we can impose through sanctions,” Finer said.
The United States could hit Russia’s biggest banks with sanctions, essentially making them pariahs and cutting them off from the global financial system.
Export control measures are another powerful weapon in the US arsenal. Such restrictions could impede Russia’s ability to import smartphones and key aircraft and car components, crippling its manufacturing industries.
The United States maintains sanctions on Russia that were imposed in response to the 2014 invasion of Ukraine.
Other penalties were imposed for issues such as cyberattacks, election interference, weapons proliferation and illicit trade with North Korea.
Europe
The European Union will present a package of sanctions against Russia on Tuesday, including proposals to target individuals and banks. But he has already played one of his main cards against Russia.
Germany’s decision on Tuesday to stop certification of the Nord Stream 2 pipeline shows that Europe is ready to attack Russia’s massive energy industry, even if it means higher natural gas prices for EU consumers.
The 750-mile pipeline was completed in September but has yet to receive final certification from German regulators.
Without it, natural gas cannot flow through the Baltic Sea pipeline from Russia to Germany.
Nord Stream 2 could supply 55 billion cubic meters of gas a year.
That represents more than 50% of Germany’s annual consumption and could be worth up to $15 billion for Gazprom, the Russian state-owned company that controls the pipeline.
“I welcome German Chancellor Olaf Scholz’s decision to cancel Nord Stream 2. And I think it’s a brave step… and the right thing to do,” Prime Minister Boris Johnson told UK lawmakers on Tuesday. .
The European Union’s trump card may be SWIFT, a global messaging service used by banks and financial institutions.
Removing Russia from SWIFT would make it much more difficult for financial institutions to send money in or out of the country, causing a sudden shock to Russian companies and their foreign customers — especially buyers of US dollar-denominated oil and gas exports.
“The cut would end all international transactions, trigger currency volatility and cause massive capital outflows,” Maria Shagina, a visiting researcher at the Finnish Institute of International Affairs, wrote in an article last year for the Carnegie Moscow Center.
SWIFT is headquartered in Belgium and governed by a 25-person board. The organization, which describes itself as a “neutral utility”, is incorporated under Belgian law and must comply with EU regulations.
There is precedent for removing a country from SWIFT. He shut down Iranian banks in 2012 after they were sanctioned by the European Union over the country’s nuclear program.
Russia’s exclusion from SWIFT would cause its economy to shrink by 5%, estimated former finance minister Alexei Kudrin in 2014 — the last time such a sanction was considered in response to Russia’s annexation of Crimea.
The United Kingdom
The UK announced sanctions against five Russian banks and three wealthy Russians on Tuesday.
Johnson told lawmakers that Rossiya Bank, IS Bank, General Bank, Promsvyazbank and Black Sea Bank would be targets.
Britain will also freeze the assets of three wealthy individuals: Gennady Timchenko, Boris Rotenberg and Igor Rotenberg.
The Rotenbergs are co-owners of the SGM Group, which manufactures oil and gas infrastructure. Timchenko is the owner of the private investment firm Volga Group.
All three were already subject to US sanctions.
Britain must also sanction Russian lawmakers who voted in favor of recognizing the independence of the two breakaway territories.
“We are prepared to go much further if Russia does not back down. We will restrict the ability of the Russian state and Russian companies to raise funds in our markets, ban a number of high-tech exports and further isolate Russian banks from the global economy,” said Foreign Secretary Liz Truss.
Rich Russians have flocked to London for the past three decades after entering the UK via investor visa programs, according to a report published by Parliament’s Intelligence and Security Committee in 2020. The UK could take action against oligarchs who turned London into their playground.
“There are many Russians with very close ties to Putin who are well integrated into the UK business and social landscape and accepted because of their wealth,” said the parliamentary report, which described London as a “laundry” for dirty money.
The UK government could withdraw visas from targeted Russians, Tyler Kustra, assistant professor of politics and international relations at the University of Nottingham in England, told CNN Business earlier this year.
“These oligarchs and high-ranking people in Russia don’t want to spend all their time in Moscow,” he said. “They like being able to fly to Heathrow, go out and live in their homes in Belgravia, Chelsea and Kensington, and shop at Harrods.”
“If we sat down and took away their visas, that would be a lot scarier for them,” added Kustra, who studies economic sanctions.
Impact: Russia
Moscow is already paying a heavy financial price for its aggression.
Moscow’s MOEX stock index fell 1.5% on Tuesday after falling more than 10% on Monday, bringing losses so far this year to around 20%.
Shares in Russian oil company Rosneft were the hardest hit on Tuesday, falling 7.5%.
In total, more than $30 billion has been wiped out of the value of Russian stocks this week alone.
“We expect more short-term declines in the Russian stock market,” analysts at JPMorgan Chase wrote in a note to clients on Tuesday.
The Wall Street bank downgraded Russian stocks to “neutral” from “overweight”.
The most discussed sanctions could reduce Russia’s gross domestic product by 1%, according to analysts at Capital Economics, but more aggressive measures, such as blocking Russia from SWIFT, could reduce economic output by 5%.
According to Capital Economics, Russia’s economy is in a better position to weather a shock than it was in 2014, when Western sanctions and falling oil prices combined to knock about 2.5% of the country’s GDP down. and trigger a financial crisis.
Russia’s balance sheet is stronger, its external debt is smaller, and its financial connections to major economies are smaller.
“The key question now is how far President Putin wants to go in Ukraine,” said Kit Juckes, an analyst at Société Générale.
“Clearly, going beyond the current area of conflict would escalate the situation as Russian troops engage with Ukrainian forces.”
Source: CNN Brasil
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