The US and other Western countries have started to impose sanctions on Russia for its moves into eastern Ukraine.
There were intense meetings in February in Brussels, Paris, London and Berlin, often running six hours at a time as the allies tried to craft the details of a historic economic blockade, according to Biden administration officials.
Some of the exports the U.S. wanted to ban were met with reluctance by the Europeans, who would essentially be telling their own companies to forgo several billion dollars in annual revenues from Russia.
President Joe Biden on Tuesday announced what he called the “first tranche” of sanctions, which will include full blocking sanctions on two Russian financial institutions and penalties on Russian sovereign debt, designed to cut Russia off from foreign financing. Biden said sanctions on Russian elites and their families would follow.
The United States’ measures come after Europe and the United Kingdom also imposed sanctions on Russia, including asset freezes and travel bans for certain Russian oligarchs and politicians.
Germany also paused certification for the $11 billion Nord Stream 2 pipeline, something the US and many of its partners very much wanted. (The US a day earlier placed targeted sanctions on those doing business in the breakaway regions in eastern Ukraine where Russia was moving in).
The diplomatic language matters, as the US and its allies, have promised Russia will face “swift and severe costs” if Putin decides to invade Ukraine. And Russia’s latest acts look like the beginning, not the end of this conflict.
Biden warned Tuesday that Russia is “poised to go much further in launching a massive military attack in Ukraine.”
The West faces a real dilemma here. The US and its allies are trying to avoid executing the most punishing sanctions just yet, so they have options if, or when, Putin escalates — and there are few signs that Russia is deescalating in eastern Ukraine.
Some have called for the harshest sanctions now, essentially arguing that failing to harshly punish Putin now won’t deter him at all, a repeat of what happened in 2014. But the West also risks exhausting its harshest tools, leaving nothing left if Russian mounts a greater attack.
The US, in combination with the efforts of European allies, are showing that they’re willing to punish Russia, but these packages are not yet at the level of the “mother of all sanctions.” Whether that happens will depend on what Russia does in the coming hours and days, whether sanctions will be enough to stop Putin at all, and the costs the US and Europe are willing to risk giving up.
The question of how to punish Russia also comes with another dilemma: specifically, what costs are the United States and its allies willing to bear?
The most aggressive sanctions, like making it extraordinarily difficult for Russian financial institutions and state-owned banks to trade in US dollars, could inflict a lot of hurt on Russia — and, very likely, its people — if the sanctions sparked inflation or other economic crises.
Other dramatic options exist, like blocking Russia’s biggest exports, oil and gas.
When there was a deadlock, U.S. negotiators would put Commerce Secretary Gina Raimondo on the phone.
“You can say ‘no’ now, but when the body bags are coming out of Ukraine, you’re not going to want to be a holdout,” Raimondo said she told allied counterparts. “Do the right thing.”
Everyone signed on — and before the invasion.
Raimondo said what ultimately drove the agreement and the fast timeline was the threat of Putin’s imminent attack on Ukraine.
“We all got religion fast that it was time to band together and stick together,” she said. “If you cause enough pain, isolate Putin, it will bring this war to an end.”
The wealthiest nations in the world — outside of China — are directly confronting Putin on their preferred terms. They have imposed sanctions in which their strengths intersect with Russia’s vulnerabilities.
Russia is reliant on the U.S., the EU, Japan, South Korea and Taiwan for cutting-edge technologies and investment, so the allies decided to cut Moscow off.
A group of economists estimated Thursday that EU countries have transferred more than 13.3 billion euros ($14.7 billion) to Russia for oil, natural gas and coal since the war began, essentially funding Putin’s war machine.
While the allied talks in the lead-up to the war were critical, the EU was not just waiting around for U.S. direction to act. Bloc members had been consulting for months.
One EU diplomat, speaking on condition of anonymity to discuss internal talks, outlined in an interview as far back as January potential penalties that included the export ban, noting that the EU had held together with its coalition on enforcing sanctions since Russia’s 2014 occupation of parts of the Donbas region in Ukraine.
But this time, the U.S. and EU responded to Russia’s aggression with a novel set of policies to cripple Putin’s ability to fight by denying it access to the semiconductors, computers, telecommunications equipment, lasers and sensors integral to war materiel.
This is a supply chain squeeze that will force Russia to raid existing airplanes, tanks and other gear for spare parts — essentially eroding its military and economic capacity.
The same U.S. and EU officials dealing with their supply chain challenges after the pandemic found a way to amplify the problem for Russia through trade regulations.
In a sign of early success, U.S. officials point to the closing of Lada auto plants in Russia and the more than 300 companies that have stopped doing business with Russia. The companies are not just Starbucks, but chipmakers such as Germany’s Infineon said it stopped all direct and indirect deliveries to Russia as well as technical support.
Within days of the invasion, the allies blocked the foreign assets of Russia’s central bank. Two senior Biden administration officials, who were not authorized to publicly discuss the strategy and spoke on condition of anonymity, said this option was not initially presented to allies out of concern that Russia could move its money ahead of time.
They waited to present the asset freeze until the invasion started and the images of bombings and death compelled the Europeans to almost immediately agree.
There is also the risk that the sanctions will fail to stop Putin or that Russia can still find ways to bring goods into its economy. Trade data analyzed by Import Genius show that China supplanted Germany in 2021 as the leading source of exports to Russia — and U.S. officials say that Russia has solicited help from the Chinese government.
On Twitter, Olivier Blanchard, former chief economist at the International Monetary Fund and now a fellow at the Peterson Institute of International Economics, equated the sanctions to the bombing of German factories during World War II.
Those bombings disrupted the German war machine in ways that made it impossible to prolong an extended fight — and economists had a role in choosing the targets.
Tania Babina, a finance professor at Columbia University who was born in Ukraine, said that sanctions tend not to stop dictators and she warned that Putin might ultimately become even more entrenched unless the U.S. and EU take more aggressive action. She said Europeans need to add sanctions that ban the use of Russian oil and natural gas.
EU Commission Vice President Valdis Dombrovskis on Thursday praised the “very good coordination” among nations and said the sanctions “are biting hard. Russia’s financial markets are close to collapse.” He also noted that the sanctions create costs for the allies, though the price is much less than the consequences of the war spreading.
Yet with every new round of sanctions, the unity of the 27 EU members is tested evermore. If imposing a ban on Russian oil and gas comes up, Germany and Italy, both heavily dependent on Russian energy, will be in a tough spot to contain the drive of several eastern member nations like Poland and the Baltic states that want to hit Putin as hard as possible as soon as possible.
The U.S. is less dependent on Russian oil and natural gas, making it easier for Biden to ban those imports earlier this month.
Published by : Aditya Andharia
Edited By : Kritika Kashyap
