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#Analize / Mălina Mîndruțescu

How would sanctions against Russia unfold?

As the Ukraine crisis intensifies, Western allies are continuing to fend off a Russian invasion by trying to keep the diplomatic front open and by threatening with sanctions.

Last week, Russia’s top diplomat, Sergey Lavrov, met with his British counterpart, Liz Truss, and the meeting was fiery, to say the least. The British Secretary of State for Foreign Affairs went into the meeting prepared to scold the Russian diplomat for the manner in which his country had been blackmailing the West for the last few months.

Instead, Truss confused some Russian provinces for Ukrainian territories, Lavrov led an icy press conference, in which he compared the dialogue, as a conversation between “a mute and a deaf person”, after which he left the room, leaving Truss alone at the podium.

After the diplomatic debacle in Moscow, this week signalled another round of Western leaders making their way up to meet Russian top officials, in order to try to reach an agreement and fend off Russian forces, who have amassed at the Eastern and Northern borders with Ukraine. Reports say that there are around 130,000 Russian forces staged outside Ukraine – if they invade, they could take over 70% of the Ukrainian territory, surround the capital city, Kiev, and force a regime change.

This week, German Chancellor Olaf Scholz met with President Zelinksy on Monday and paid a visit to President Putin on Tuesday. In Ukraine, Scholz brought a message of solidarity, stressing the Alliance’s support for Ukraine, but he refrained from committing to send weapons to Kiev.

In Moscow, President Putin confirmed his willingness to find a diplomatic solution to the crisis, but refused to double down from his demands – a stop to NATO’s eastward expansion and a commitment that Ukraine will never join the Alliance.

In the meantime, the Ukrainian Ambassador to the UK, a seasoned diplomat, said during a radio interview with the BBC over the weekend, that Ukraine perhaps should consider dropping its ambitions of joining NATO, a remarkable statement, that has had no precedent from the Ukrainian side. In his statement, Ambassador Vadym Prystaiko mentioned that Ukraine could drop the NATO bid, in order to avoid a war, even though this its ambitions of joining are stipulated in the Constitution.

Even though the Ambassador later nuanced his remarks, and the whole situation was framed as a failure of communication, the issue is a matter of debate.

ambassador

Photo source: Reuters

 

Ukraine’s ascension process to NATO is what started this conflict in the first place – President Putin demanded that Ukraine never join NATO and that the Alliance stop its eastward expansion into Europe. If this were to happen, the pressure of military threat, a strategy that the Russian President has been using more often, and, in some cases, successfully (as in the case of Syria) could lead to a dangerous precedent.

If the Western Alliance, and Ukraine, are seen to be caving to the demands of the Russians, the failure to contain the conflict and deescalate it without meaningful concessions to the West, could prove disastrous for the reputational strength of the transatlantic Alliance.

In addition, if the conflict would be resolved by Ukraine ceding to its most fervent wish, other illiberal actors from the region, and beyond, could follow in Russia’s footsteps – China, for example, is closely observing the situation in Ukraine, in order to see how the Western alliance might act in a similar situation further east, in Taiwan.

With this preview in mind, let us look at what sanctions might be imposed against Russia, in case an invasion in Ukraine were to take place.

During the last few weeks, criticism has been directed towards the Western Alliance for not pre-emptively doing more against Russia and imposing sanctions, as a way to prevent their assertiveness in Ukraine, and towards the Allies. While the West has talked tough when it came to warnings against Russia, stating that the repercussions and the sanctions will be swift and dire, an aggressive approach alone did not dissuade the Kremlin from moving forward.

Some of the sanctions being drafted could be implemented before any invasion, in response to activities Russia has already undertaken, such as cyber-attacks. Additionally, what the Alliance is working towards is expected to represent a broader package of sanctions focused on finance, energy and technology.

ukraine conflict

Photo source: Reuters

 

The US administration’s sanctions would target figures and companies in or close to President Putin’s inner circle as well as the relatives they sometimes use as asset-owning proxies. The aim would be to cut targets off from the global financial system and go after money they have parked in the West, according to a report by The Economist.

Targeting Russian state-linked banks, including Sberbank, a savings giant, could be an option, while the US president also wants to keep open the option, resisted by some European countries, of excluding Russian banks from swift, the interbank messaging system used to make cross-border transfers.

“In energy, the talk in Washington is of broadening sanctions to target not just current production but investment, too. One way would be to restrict capital-raising by Russian oil-and-gas giants in New York and London. America has also threatened to prevent the opening of Nord Stream 2, a pipeline that would send Russian gas to Europe. Technology is arguably America’s most powerful lever. It could, for instance, block more exports of high-tech gear on the Commerce Department’s “entity list”.

This would restrict Russia’s access not only to items used by its defence sector, but also to parts used in many phones and appliances, inconveniencing Russia’s consumers as much as its weapons-makers”, the report continues.

usa russia

Photo source: Reuters

 

However, imposing such drastic sanctions could also lead to retribution from Russia’s side. He most consequential of them all – energy. Russia is the EU’s largest energy supplier –  about 40% of the bloc’s natural gas imports and nearly one-third of its crude oil imports come from Russia.

Securing alternative energy supplies, in case Russia pulls back its resources, is an option that European and US allies are discussing, but which is far from turning European dependency to Russian gas obsolete overnight. Another crisis that may unfold, if sanctions are imposed, is also one related to supply of raw materials.

The EU depends on Russia for critical raw materials – Russia supplies about 40% of the world’s palladium, which is needed in the catalytic converters used in vehicles to limit harmful emissions, and about 30% of titanium, which is crucial for the aerospace industry, according to a Financial Times analysis.

In a crisis as complex as this one – with vested, interconnected interests and with geopolitical, security and economic dimensions swirling all around, any decision is not taken lightly. Despite the rising tensions of the last few months in Ukraine, one way in which this situation could be characterised, is, indeed, caution.

 

Photo source: EPA

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