The story so far: In the wake of Russia’s troop buildup near the Ukrainian border, with a deployment of over 100,000 troops, many Western countries, prominently those in the G7 group of large economies have threatened to impose economic and financial sanctions on Moscow, which they claim “will have massive and immediate consequences on the Russian economy”.
While Russia has been under multiple economic sanctions by various countries since it annexed Crimea from Ukraine in 2014, more restrictive measures were imposed after a former Russian spy was poisoned in England in 2018, aside from restrictions imposed by the US after allegations of Russian meddling in the country’s presidential election in 2016.
Economic sanctions entail restricting or stopping various types of trade and financial activities with countries seen as perpetrating geopolitical aggression. While the jury is still out on whether such sanctions contribute to actually restraining the targeted countries or are a mere symbolic exercise, their use has become fairly rampant.
The past decade itself, is replete with instances of sanctions being imposed on countries in times of crises, from the United states and European union bidding to prevent Iran from obtaining a nuclear weapon by way of cutting it off from the SWIFT financial network in 2012, to US sanctions in response to North Korea’s cyberattacks in 2014 and 2017.
What are the sanctions Russia has been threatened with?
Amid the current border crisis between Russia and Ukraine, US president Joe Biden is considering putting direct sanctions on Russian President Vladimir Putin, which may not be detrimental to him personally, but would be politically adverse.
There are speculations of a myriad other sanctions if Russia does not de-escalate. Export controls or export bans are one of the most common ways of sanctioning countries seen as propagating conflict. According to a White House official, the United States, along with its allies, is considering a ban on technology exports in areas such as artificial intelligence, defense and quantum computing, among others. The Biden administration has asked the US electronic industry to be prepared for new restrictions on the export of electronic chips to Russia.
These bans on technology exchange and export are akin to those imposed by the US in the wake of the Cold War.
Some western countries considering another harsher, more detrimental measure against Russia — cutting it off from SWIFT, a financial network through which international transactions of 200 countries pass. The SWIFT network, headquartered in Belgium is used by over 11,000 global financial institutions.
This measure was first used in 2012, when Iran was disconnected from SWIFT over its nuclear programme, making it difficult for the country to receive payments for its oil exports. This led the Iranian economy to plunge into freefall, losing nearly half of its revenues from oil export.
The move to cut off Russia from SWIFT was also floated in 2014 as an idea that could act as a deterrent to Crimea’s annexation, following which Russia developed its own financial messaging network called SPFS, which failed to establish itself internationally.
The White house could also target Russian financial institutions, which would mean state-owned banks and possibly even Russia’s sovereign wealth fund known as the Russian Direct Investment Fund, aimed at investing in leading companies to aid the country’s economic growth.
Restricting the country’s access to debt and equity markets is another measure that is being threatened by the White House, with some Russian debt bonds already becoming increasingly inaccessible. If this comes into force, financial markets in the U.S. would no longer be able to buy debt bonds from Russia.
This was earlier done in April 2021, when the Biden administration prohibited U.S. investors from buying any new Russian debt bonds over allegations of Russian meddling in the country’s national elections. In another extreme sanction that is being speculated, the U.S. cut Russian access to the US dollar — the currency that dominates international transactions.
Sanctions may also include amping up curbs on Russia’s energy sector, with multiple U.S. and EU restrictions already in force on government-owned gas company Gazprom and its oil producing subsidiary Gazpromneft, among other energy firms. The tightening of these sanctions could mean not letting these firms settle transactions in U.S. dollars.
Despite Europe’s reliance on Russia for a substantial part of its energy supplies, western powers, especially Germany, are also looking at blocking Russia’s newly-completed gas pipeline Nord Stream 2 from Russia to Germany, which aims at supplying natural gas across Europe. The pipeline currently awaits regulatory approval.
