Russia vs Ukraine: What sanctions are being imposed on Russia and what else can be done?

Measures to harm Russia and try to force President Vladimir Putin to back off from military action are expected as the crisis escalates again.

Russian military forces began a massive invasion of Ukraine on Thursday. There are reports of troops crossing several points of the border and explosions near major cities across the country — and not just in the Donbas region, where separatist groups have recently been recognized and supported by Russia.

What is a sanction?

A sanction is a penalty imposed by one country against another, often to prevent it from acting aggressively or infringing international law.

Sanctions are usually designed to harm a country’s economy or the finances of certain individuals, such as top politicians. They can include travel bans and arms embargoes. They are among the toughest measures nations can take — instead of declaring war.

What sanctions have been imposed so far?

The US sanctions announced on Tuesday (22) seek to undermine Russia’s ability to fund its military efforts:

• two state-owned banks — which the US says are critical to Russia’s defense industry — will no longer be able to do business in the US or access its financial system;
• five people described as part of Putin’s inner circle were punished;
• restrictions were placed on agreements with the US involving Russia’s national debt;
• Americans are banned from doing business in Luhansk and Donetsk.

Few US companies are active in the regions involved. But the White House said it could impose broader sanctions.

The European Union is sanctioning 27 Russian individuals and organizations, including banks. The EU is also limiting access to European capital markets — cutting off the ability to access funds from European banks — and banning trade between the European Union and the two rebel-held regions.

Some 351 members of Russia’s Duma, the lower house of parliament, are also targeted by sanctions.

German Chancellor Olaf Scholz has suspended the opening certification of the Nord Stream 2 gas pipeline from Russia to Germany.

And UK Prime Minister Boris Johnson announced sanctions against five Russian banks and three Russian billionaires.

Some UK lawmakers want the government to be even tougher — targeting more banks and individuals.

What other sanctions could Russia face?

The West could take even tougher measures against Russia if the crisis persists.

Exclusion of Russia from Swift

One measure would be to exclude Russia from the global financial messaging service Swift, used by thousands of financial institutions around the world.

This would make it very difficult for Russian banks to do business abroad, but there would also be an economic cost for countries like the US and Germany, whose banks have close ties to Russia.

The White House says this is unlikely to be adopted as an immediate response to an invasion.

Ban Russia from using the US dollar

The US could ban Russia from carrying out financial transactions with US dollars. Any Western company that allowed a Russian institution to trade in dollars could be punished.

This could have a huge impact on Russia’s economy as most of its oil and gas sales are settled in dollars. This could harm Russia’s foreign trade in other sectors.

On the other hand, Russian oil and gas exports would plummet, affecting European countries that depend on Russian gas.

bank blocking

The US can blacklist Russian banks, making it nearly impossible for them to transact internationally.

Moscow would have to bail out the banks and do what it could to prevent rising inflation and falling incomes in the country.

But that would also hurt Western investors with money in these banks.

Furthermore, Russia has reserves of more than US$630 billion (R$3.1 trillion) in its central bank to protect itself against these economic shocks.

Blockade on high-tech exports to Russia

The West could restrict the export of high-tech commodities to Russia.

The US, for example, could bar companies from selling products like semiconductor microchips, which are used in everything from cars to smartphones.

This would affect not just Russia’s defense and space sectors, but its entire economy, although it would also hurt Western companies that sell these technologies.

power restrictions

Russia’s economy is heavily dependent on the sale of gas and oil abroad. Western nations may refuse to buy oil and gas from Russia’s energy giants such as Gazprom or Rosneft.

Again, this could make gas more expensive in Europe. Germany, for example, depends on Russia for a third of its gas supply.

Limit Russian access to London financial institutions

The amount of Russian money in banks and properties in the UK is so large that the British capital is sometimes called “Londongrad”.

The UK government says it is tackling this problem by requiring “unexplained wealth orders”, which force individuals to declare where their money comes from.

But few such orders were issued.