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What sanctions do Western allies agree on if Russia invades Ukraine?

In case Russia invades Ukraine, Putin would suffer severe sanctions; The global economic implications are a concern.

Russia invades Ukraine - screen shot from PBS news
If Russia invades Ukraine – screenshot from PBS news

In case Russia invades Ukraine, the UK and US have warned to punish President Vladimir Putin’s economy and possibly impose personal sanctions on him.

Foreign Secretary Liz Truss said she had “ruled nothing out” as she joined US Vice President Joe Biden in stating that if Russia invades Ukraine, personal penalties against Putin will be considered.

Derek Chollet, a state department counselor, said the Russian president would suffer a “significant strategic setback” if he invaded Ukraine, given the severity of the western sanctions. Any sanctions that are ultimately agreed upon will be “dynamic,” which means that the allies will be able to “evolve and innovate” in order to sustain pressure on Moscow.

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Russia seeks all of eastern Europe to boast unchallenged military superiority and is capable of coercing everyone into submission. There is no cost-free policy that can be implemented to prevent that.

Russia has amassed an estimated 100,000 troops near Ukraine’s borders, but has denied invading the former Soviet republic country. While other countries have expressed support for sanctions against Russia, worries have been raised about the impact on Europe, notably on gas supply.

Ukraine crisis NATO troops operate in Estonia - Russia border - screen shoot Frace24
Ukraine crisis NATO troops operate in Estonia – Russia border/screenshot from Frace24

Last week, a bill called the “Putin Accountability Act” was launched in the US House of Representatives, urging the Biden administration to explore penalties on Putin and Russia in advance of a possible invasion.

The measure requires the President to submit to Congress a report on Mr Putin’s net worth and sources of income. Additionally, it claims Olympic champion Alina Kabaeva as the probable girlfriend of Russia’s president.

Who might be a target?

1 – The US and Europe have proposed blocking Russia’s access to SWIFT, a messaging system widely used in international banking operations.

Previously, the US was successful in convincing the SWIFT system to expel Iran over its nuclear program. In 2014, after Russia seized Crimea, allies discussed using SWIFT against Russia, but Russia declared that doing so would constitute a declaration of war.

2 – Russia might be shut off from foreign earnings generated by oil and gas production, which account for more than 40% of the country’s revenue.

3 – The US is also considering imposing restrictions on Russia’s largest banks and has previously proposed measures aimed at limiting Moscow’s ability to exchange Russian rubles into dollars and other foreign currencies. It might also impose import restrictions on Russia, preventing it from purchasing critical things such as smartphones and consumer electronics from abroad.

Ukrainian T-64 tanks. PHOTO VIA WIKIMEDIA COMMONS
Ukrainian T-64 tanks / PHOTO WIKIMEDIA COMMONS

4 – Certain members of Putin’s family and acquaintances may be impacted by possible sanctions on him.

Dmitry Peskov, the Kremlin’s spokesman, argued on Wednesday that personal sanctions against Putin would be “not unpleasant (but) politically divisive.”

5 – The draft names numerous Russians for punishment consideration, including Putin’s whole cabinet, his friend oligarchs such as Petr Aven and Mikhail Fridman of Alfa Group, Monaco football club owner Dmitry Rybolovlev, and Alexander Vinokurov, the son-in-law of Russian Foreign Minister Sergey Lavrov.

Russia’s senior officials overlooked the fact that they are constitutionally prohibited from possessing assets, property, or bank accounts abroad.

Could sanctions be detrimental to Russia?

EU sanctions might be catastrophic for Russia’s President, as the EU is Russia’s largest trading partner. According to the European Commission, in 2020 nearly 37% of its commerce are going through the EU.

On Monday, the EU’s 27 foreign ministers issued a statement condemning Russia’s “continuing hostile acts and threats towards Ukraine” and urging Russia to de-escalate.

“Any further Russian military assault against Ukraine will have tremendous consequences and significant costs,” they stated, without specifying the “consequences.”

How might sanctions affect the western world?

1 – Interfering with foreign investment in Russian banks such as Sberbank might have a similar effect, as Western investment funds holding shares in Russian banks would see their value plummet.

2 – Putin may impose a gas embargo in retaliation for Western sanctions. Around 40% of western Europe’s gas supply comes from Russia, however, the UK’s reliance on Russia is far lower at around 3%.

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By focusing on Russian oil and gas exports, the risk of price spikes in Europe and elsewhere increases as markets adjust to the supply disruption. This could be detrimental to customers throughout the winter when they are already suffering significant rises in energy bills and inflation as they recover from the Covid-19 outbreak.

According to Reuters, some energy corporations have approached US lawmakers to request a “cooling down” or “winding down” period to avoid having their assets taken if they are unable to fulfill commercial commitments with Russia.

Prime Minister Boris Johnson said Tuesday that while “we must be respectful” of Germany’s higher reliance on Russian gas than the UK, “we must hope that they are willing to make that sacrifice for the sake of peace.”

The American Petroleum Institute, the largest lobbying group for oil and gas drillers in the United States, stated: “Sanctions should be as targeted as feasible to avoid jeopardizing US companies’ competitiveness.”

2nd Nord Stream

Among the measures that the West may inflict on Russia is the suspension of the Nord Stream 2 pipeline project, which plans to transfer gas from Russia to Germany via the Baltic Sea.

The pipeline has been constructed but has not yet been approved by regulators. There had already been concerns that the project would expand Europe’s energy reliance on Russia.

German officials stated that shutting down the pipeline if Russia invades Ukraine would be “on the table” if an invasion occurs.

However, shutting down the pipeline would exacerbate Europe’s gas supply shortage, which has driven up energy costs.

German Chancellor Olaf Scholz has expressed reservations about imposing sanctions on Russia and reaffirmed his desire for a diplomatic solution to eastern Europe’s issues.

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