Will it hurt? How Sanctions Against Russia Can Be Ambiguous

On Monday evening, Russian President Vladimir Putin ordered the tanks to be shipped across the border into Donetsk and Luhansk regions in eastern Ukraine, where Russian proxies have been operating since 2014. vote.

At dawn on Thursday, Putin ordered Russian troops to launch a full-scale invasion of the neighboring country.

As NATO leaders firmly eschew military action, economic sanctions remain the main leverage on Putin and his regime. While some sanctions have already been announced, the extent to which they can soften Russia’s plans is debatable, and various national priorities are already in place to try to limit them.

Following Russia’s offensive in eastern Donbas on Monday, the UK announced restrictions on the sale of Russian debt. The asset freeze on three Russian oligarchs and their family members also continued, although all three have been on US sanctions lists since 2018.


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In a televised address on Thursday at noon, British Prime Minister Boris Johnson hinted at an escalation in sanctions, saying: “Today, together with our allies, we will agree on a massive package of economic sanctions designed to slow down the Russian economy in time.”

Foreign Secretary Liz Truss also suggested that “tough sanctions” would be imposed.

Addressing MPs on Thursday, Johnson provided additional details. A total of 100 individuals, legal entities and subsidiaries will now face asset freezes, including most of the major Russian banks, where Russian firms will be prohibited from incurring debt.

Flights from the largest airline in Russia Aeroflot– who was willing to secure a £40m sponsorship deal with Manchester United – would be banned. The foreign ministry says these steps will help “squeeze the life out of the Russian economy” in the long run. An immediate reduction in hostilities cannot be expected.

Other measures include the suspension of dual (both civilian and military) export licenses for military parts. The export of high technology will also be banned, and bank deposits of Russian citizens will be limited. An economic crimes bill has also been introduced, which the government says would curb “unexplained wealth”, including UK-based Russian oligarchs.

The US was the first country to strike back on Monday against Russia’s wide-ranging invasion of Ukraine, halting investment, trade, and funding for the self-proclaimed Luhansk and Donetsk republics in eastern Ukraine in the Donbass, and exercising the power to impose sanctions on those found guilty. work there.

US President Joe Biden then sanctioned the state-backed Promsvyazbank and Russia’s sovereign debt, but so far has not sanctioned any state-owned Russian commercial bank.

So far, the sanctions against a few individuals and their relatives have also been minimal.

Ahead of further talks this week with NATO allies, Biden warned that Vladimir Putin “has never seen sanctions like the ones I promised would be imposed.”

However, one senior US State Department official said Reuters on Thursday that any new sanctions would not target the Russian energy market, Biden’s earlier tough comments are called into question.

Asked last night about the possibility of excluding Russia from SWIFT, Biden stressed that this is “not the position that the rest of Europe would like to take” – meanwhile, the United States remains openly ambivalent about this issue, with suggestions that Washington fears such a move would put the US dollar at risk by prompting Russia and China to launch a rival payment system.

On Tuesday, Germany announced its shocking decision to freeze construction permits for Nord Stream 2, calling the situation “fundamentally different” after Monday’s incursions.

Completed in 2021, the underwater gas pipeline was built to transport 110 billion cubic meters of gas annually from Russia to Germany, bypassing the existing gas pipeline crossing Ukraine.

Even though winter is only about six weeks away and the pipeline was not expected to go online until late 2022, Germany’s long-term reliance on Russian gas puts it in a weak position for the foreseeable future.

While reports say the US has promised that Germany will be able to expedite Qatari gas supplies, it does not currently have liquefied natural gas (LNG) ports to allow this transfer. Meanwhile, Russia still provides 85% of Germany’s gas imports.

The EU has already agreed to lift travel bans and seize the assets of 27 individuals and entities it has classified as involved in “undermining Ukraine’s sovereignty,” including Russian Defense Minister Sergei Shoigu and several Russian military personnel. 351 deputies of the Russian parliament (Duma), who on Monday voted for the recognition of Lugansk and Donetsk by Russia.

EU foreign ministers have agreed on sanctions against banks that finance military operations, including against Promsvyazbank, which is under US and UK sanctions.

A host of new measures were confirmed Thursday evening, including freezing Russian assets in the bloc, blocking Russian banks’ access to European financial markets and imposing export controls. Oil and gas imports, which generated 9.1 trillion rubles ($119 billion) in revenue in 2021, are not subject to sanctions.

As in the United States, exclusion of Russia from the SWIFT system is still out of the question, and Russian President Vladimir Putin himself will also avoid any personal sanctions,

Italian Prime Minister Mario Draghi said last week that any EU sanctions on Russia should not include energy, even in the event of a full-scale invasion of Ukraine.

Like Germany, Italy is heavily dependent on gas, 90 percent of which it imports, with Russia a key supplier.

However, despite its protests, Italy’s heavy reliance on EU funding makes any protest against general EU sanctions regimes unlikely, unless commercial exemptions are made for other countries.

Both Belgian and Italian officials have expressed the wish that luxury goods remain an exception to any sanctions list, given the economic benefits they receive from trade with Russia.

There were reports today, both countries have successfully carved out these exceptions.

Hungarian Prime Minister Viktor Orban has also proved to be a tricky element in the mix. In January, he paid a diplomatic visit to Moscow, during which he watched Putin criticize the decision of Hungary and 13 other countries of Central and South-Eastern Europe to join NATO. His foreign minister, Peter Szijjártó, even said Euronews that the government “doesn’t even want to think” about new sanctions against Russia, calling the previous ones a failure.

However, after Monday’s incursions, Orbán reassured European Council President Charles Michel that “Hungary is part of the EU’s overall position.”

Poland, which shares a land border with Ukraine along with fellow NATO members Slovakia, Hungary and Romania, has been openly pushing for more punitive strikes against Russia and has endorsed new plans to increase military spending.

None of the members of NATO or the EU has publicly stated that they are ready to deploy troops in Ukraine.

The EU and its NATO allies have yet to propose sanctions against Russia’s lucrative energy industry. While this may save Europe from an even sharper energy price spike this winter, it will also protect Russia from the most devastating sanctions packages the West has at its disposal.

The likelihood that sanctions will force Russia to back down is incredibly small.

Not only has Putin already launched an invasion—meaning a retreat would have meant a significant loss of face for him in the Russian elite—he has spent the years since the 2014 crisis pampering himself in case of further hostilities.

Russia already has 630 billion foreign exchange reserves, which is 75% more than in 2015.

The value of some key Russian exports has jumped. Oil rises in price to $100 a barrel, while wheat prices soared by 20 percent.

Since the government budget must also break even, the impact of any sanctions is likely to resemble a long-term financial war of attrition.

As it stands, Russia intends to remain stable while the West fights for a coherent financial response to an invasion that could have far less serious consequences than these Western leaders had previously thought.

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