Sanctions against companies and sectors
A proven remedy. After Russia’s first incursion into Ukraine — the annexation of Crimea in 2014 — the EU and the US imposed sanctions on parts of the Russian economy. Since then, Russian banks have had limited access to the international capital market, arms sales to Russia are restricted and there are restrictions on the export of energy sector technologies to Russia. Companies operating in Crimea have been banned.
Economists disagree on the effectiveness of the sanctions. The fact is that since the annexation, the Russian economy has been ailing and the ruble has lost half of its value.
The US is now hinting at a hefty extension of sanctions through measures against individual (state) banks, companies and the energy sector. American chipmakers have already been informed by the government that they may no longer be allowed to export to Russia. During the Soviet Union, there was also a ban on technologically lagging Russia.
Further curtailment of technology exports in the energy sector is also an option. The disadvantage of this is that the West is dependent on raw materials from the largest country on earth, and not just on gas and oil. Also think of nickel, copper, diamonds, cobalt.
Disconnection from international payment system
Also called ‘the nuclear option’ in the West. The Swift payment system handles transactions between more than eleven thousand financial institutions worldwide. Uncoupling from Iran crippled that country’s economy in 2012. Russian banks are also dependent on Swift, despite Russia’s recent development of its own payment system. The ruble would probably collapse.
But the West is reluctant to uncouple from Russia. Because how will it pay for Russian commodities, such as oil and gas? Our own financial institutions would be affected, as would the Russian population. After the annexation of Crimea, the US central bank threatened to disconnect, but Russia simply remained connected to the global economy.
Sanctions against persons
The best way to stop Putin without hitting the Russians themselves, according to imprisoned opposition leader Alexei Navalny. Impose sanctions against oligarchs and Putin’s system begins to falter, Navalny said. The key figures around Putin would then no longer be able to profit from corruption in Russia through villas, yachts and planes in the West. And they are crucial to Putin’s power. In short: if you hit them, you will hit Putin.
Western countries have already put Russians on sanctions lists after the annexation of Crimea, alleged election meddling and assassination attempts on Russians abroad. on the EU sanctions list There are 185 Russians, including officers involved in the capture of Crimea and the war in eastern Ukraine. Their foreign assets are frozen and they are not allowed to travel to the EU.
But the Western sanctions lists, much to Navalny’s disappointment, do not include top officials or oligarchs, such as Chelsea owner Roman Abramovich. In America, the Democratic Party has introduced a bill that would make it possible to put Russia’s top commanders and even President Putin on sanctions lists.
Limited access to the bond market
The Russian government already has limited access to the international capital market, but it could be further restricted. Investors would then no longer be able to buy debt securities from the Russian government. The US government has already indicated that it is considering this measure, but only wants to introduce it if the EU and the United Kingdom join.
No Nord Stream 2
A line through the gas pipeline from Russia that Germany is so eager to put into use? In recent years, the German government has not succumbed to US sanctions against the construction or to complaints from Eastern European countries, including Ukraine, that Nord Stream 2 is pinching off Russian gas. Also internal repression by the Kremlin was no reason to revise ‘the purely economic project’, according to Germany.
Now all that is required is approval from regulators. But as Ukraine is surrounded by the Russian military and other Western countries are pushing for sanctions, the Germans sound a little more divided. Annalena Baerbock, the new foreign minister, says Nord Stream 2 is unlikely to go ahead with a Russian military raid, but Chancellor Olaf Scholz remains cautious about using the pipeline as a sanction.
Keeping Nord Stream 2 closed could endanger Western Europe’s gas supply: Russia has made it clear that it only wants to send extra gas through the new pipelines in the Baltic Sea. The Russian government does not lose sleep over the loss of income: since the first Western sanctions wave in 2014, Russia has expanded its reserves to $620 billion in foreign exchange and gold.