Explained: how Western sanctions could target Russia

U.S. President Joe Biden and Russian President Vladimir Putin arrive for the U.S.-Russia Summit at Villa la Grange in Geneva, Switzerland June 16, 2021. Saul Loeb/Pool via REUTERS/File Photo

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LONDON, Jan 20 (Reuters) – Growing tensions between Moscow and Western powers are raising fears that new sanctions could be imposed on Russia, possibly the toughest yet, if it attacks neighboring Ukraine.

US Senate Democrats have unveiled a bill to impose sweeping sanctions on Russian government and military officials – including President Vladimir Putin – and banking institutions if Moscow engages in hostilities against Ukraine.

“If Russia uses its conventional military to acquire land in Ukraine, it will meet a harsh economic response,” a senior White House official said Wednesday.

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Russia has massed tens of thousands of troops near Ukraine’s borders in what Kiev and its allies fear is preparing for a new military offensive. Read more

Russia, which denies planning to attack Ukraine, has been under sanctions since its 2014 annexation of Crimea from its neighbor. More punitive measures were added after a former Russian spy was poisoned in Britain in 2018 and following an investigation into alleged Russian interference in the 2016 US presidential election won by Donald Trump.

Russia has denied any role in the poisoning of ex-spy Yuri Skripal and his daughter, and denies trying to interfere in foreign elections.

Here are some ways financial sanctions could target Russia:


The White House has told the U.S. chip industry to prepare for further curbs on exports to Russia if Moscow attacks Ukraine, sources said. This includes potentially blocking the country’s access to global electronic supplies.

Similar measures were deployed during the Cold War, when the United States and other Western nations maintained harsh tech sanctions against the Soviet Union, keeping it technologically backward and stunting growth.


The United States and the European Union already have sanctions against Russia’s energy, financial and defense sectors.

The White House is floating the idea of ​​curbing Russia’s biggest banks and has previously mooted measures targeting Moscow’s ability to convert rubles into dollars and other currencies. Washington could also target the state-backed Russian Direct Investment Fund. Read more

According to former US State Department economist Mark Stone, sanctions applied to individual companies often cause industry-wide difficulties, as they make investors fear that restrictions will be widened or that they will be unable to differentiate.

“Sanctioning all transactions with Russian banks and freezing assets would be more impactful and targeted” than a shutdown of the global messaging system SWIFT, said Brian O’Toole, a fellow at the Atlantic Council think tank.

Targeting Russia’s access to SWIFT, which is widely used in international financial transactions, would only become truly useful after broad financial sanctions by the United States, Britain and the European Union, O said. ‘Toole.


Sanctioning individuals through asset freezes and travel bans is a commonly used tool and can sometimes have wide resonance. Britain imposed sanctions in April 2021 on 14 Russians under a new law giving the British government the power to punish those it believes are credibly involved in the most serious corruption abroad. .

The bill unveiled last week by Senate Democrats provides for sweeping sanctions against senior Russian government and military officials, including Putin. Read more

Kremlin spokesman Dmitry Peskov said the idea of ​​imposing sanctions on the Russian president would mean severing relations between Moscow and Washington. Read more


One of the toughest measures would be to disconnect the Russian financial system from SWIFT.

SWIFT, used by more than 11,000 financial institutions in more than 200 countries, is a Belgium-based cooperative governed by a 25-member board of directors, including Eddie Astanin, chairman of Russia’s Central Counterparty Clearing Center (NCC).

There is precedent: In March 2012, SWIFT disconnected Iranian banks as international sanctions tightened against Tehran over its nuclear program – a move that saw the country lose half of its oil export revenue and 30 % of its foreign trade, according to the Carnegie Moscow Center think tank.

Iran’s economy is smaller and not as internationally connected as the Russian economy, whose interconnectedness with the West has functioned as a shield. The United States and Germany would be the biggest losers, as their banks are the most frequent SWIFT users along with Russian banks, according to Maria Shagina of the Carnegie Moscow Center.

Calls to cut off Russia’s SWIFT access were raised in 2014 when Moscow annexed Crimea, prompting Moscow to develop an alternative messaging system, SPFS.

The number of messages sent through SPFS reached around 2 million, or a fifth of Russian internal traffic, in 2020, according to the central bank, which aims to increase this figure to 30% in 2023. However, the SPFS system, which has a size limits on posts and only operational on weekdays, struggled to pick up foreign members, Shagina wrote in a 2021 post.

O’Toole of the Atlantic Council said cutting Russia off from SWIFT would cause immediate disruption, but the impact would lessen over time.

“Some payments would be delayed and there could be an increase in costs to make new ones, but generally speaking there is unlikely to be a massive collapse in Russian trade as long as this trade remains legal/not sanctioned,” O’Toole said.


Access to Russian bonds has become increasingly restricted and restrictions could be tightened further, with a ban on secondary market participation being offered as an option.

In April 2021, US President Joe Biden banned US investors from buying new Russian ruble bonds – OFZs as they are known – due to accusations of election interference.

Sanctions imposed in 2015 made future Russian dollar debt ineligible for many investors and indices such as JPMorgan’s EMBI Global. These measures have reduced Russia’s external debt by 33% since the beginning of 2014, from $733 billion to $489 billion in the third quarter of 2021. Lower debt improves a country’s balance sheet on the surface, but the deprived of sources of financing that could contribute to the economy. growth and development.

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Reporting by Karin Strohecker in London and Andrey Ostroukh in Moscow; Editing by Timothy Heritage and Catherine Evans

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