Shortly after Vladimir Putin announced the decision to recognise the breakaway regions of Donetsk and Luhansk in the Donblas belt and sent in troops as ‘peacekeeping measures’, Russia was hit with sanctions from different countries.
Let’s understand what sanctions mean, which countries have imposed them and why they may not be as effective as one would think.
What are sanctions?
First things first: Let's understand what a sanction means.
Simply put, they are economic and financial punishments enforced by a country against another nation. Sanctions can range from travel bans and export restrictions to trade embargos and asset seizures.
Economic sanctions provide a policy tool short of military force for punishing or forestalling objectionable actions.
They're widely applicable beyond the sanctioning country's borders and can be costly to their targets amid increased global trade and economic interdependence.
Sanctions can have very serious consequences for receiving countries, and the hope is that the population in these areas become agitated enough to demand change from their governments.
Sanctions against Russia
This is far from the first time that sanctions have been imposed against Russia. Back in 2014, the United States and the European Union had imposed sanctions against Russian officials, industries and companies following Moscow’s annexation of Crimea from Ukraine in 2014.
However, this time around several countries across the world have imposed tough sanctions, with the US saying that these could be its toughest and fiercest ever penalties.
With saying that, let’s take a look at the sanctions imposed by the different countries.
United States: US president Joe Biden has announced financial sanctions on banks and oligarchs as punishment for what he called “the beginning of a Russian invasion of Ukraine.” He said the US would impose “full blocking” on two large Russian financial institutions and “comprehensive sanctions” on Russian debt.
The Associated Press reported the US president as saying, “That means we’ve cut off Russia’s government from Western finance. It can no longer raise money from the West and cannot trade in its new debt on our markets or European markets either.”
European Union: The European Union announced sanctions taking aim at the 351 Duma legislators who voted in favour of recognising separatist regions in Ukraine, as well as 27 other Russian officials and institutions from the defence and banking world. They also sought to limit Moscow’s access to EU capital and financial markets.
“This package of sanctions… will hurt Russia and it will hurt a lot,” EU foreign policy chief Josep Borrell said.
“We will make it as difficult as possible for the Kremlin to pursue its aggressive policies,” said EU Commission president Ursula von der Leyen.
Britain: Prime Minister Boris Johnson named five Russian banks and three wealthy individuals whom the UK hit with sanctions on Tuesday.
Germany: In response to Russia formally recognising two breakaway regions in eastern Ukraine, Germany halted the Nord Stream 2 Baltic Sea gas pipeline project, designed to double the flow of Russian gas direct to Germany.
German chancellor Olaf Scholz said he had asked the economy ministry to make sure certification could not take place now.
While Washington welcomed Scholz's announcement, Ukrainian foreign minister Dmytro Kuleba tweeted his approval.
"This is a morally, politically and practically correct step in the current circumstances," he said. "True leadership means tough decisions in difficult times. Germany's move proves just that."
It's important to note that Germany gets half its gas from Russia and that the Nord Stream 2 would have been highly beneficial to the European giant.
Australia: Prime Minister Scott Morrison said that targeted financial sanctions and travel bans will be the first batch of measures in response to Russian aggression toward Ukraine. Australia and Russia have imposed sanctions on each other since 2014. The sanctions were initiated by Australia in protest of Russian involvement in the Ukraine conflict.
Japan: Japan’s prime minister also announced sanctions targeting Russia. Prime Minister Fumio Kishida said that his government will ban the new issuance and distribution of Russian government bonds in Japan in response to the “actions Russia has been taking in Ukraine.”
He said Japan will also suspend visa issuance to the people linked to the two Ukrainian rebel regions and freeze their assets in Japan, and will ban trade with the two areas.
Canada: Prime Minister Justin Trudeau also imposed new sanctions on Russia in response to the deployment of forces into Ukraine.
Will these sanctions affect Russia?
One would assume that these sanctions would adversely impact Russia.
However, the situation isn't that clear cut.
The US wants to cut off Russia from SWIFT financial system. For the unversed, the SWIFT system stands for the Society for Worldwide Interbank Financial Telecommunication and is a secure platform for financial institutions to exchange information about global financial transactions such as money transfers.
Being cut off from SWIFT would make it tough for Russians to send money overseas or receive money from outside. However, the decision has to be ratified by Brussels. The issue here is that being a global entity, it would not want to be perceived as a tool of America.
Moreover, Russia has been using alternatives such as the SPFS (System for Transfer of Financial Messages). There are reports that Russia is also collaborating with the Chinese on a possible venture, a potential challenger to SWIFT.
Also, Russia knows that it has powers as it controls the Nord Stream pipeline.
Germany is almost totally reliant on natural gas imports, with Russia meeting more than half of the supplies to that country in 2020, according to IHS Markit.
Rajan Menon in The Hill explained that while the sanctions may hurt Russia, they won't stop Vladimir Putin. In his opinion piece, he writes that Russia’s foreign exchange reserves now total $630 billion — the world’s fourth-largest. Also, Russia has reduced its dependence on the US dollar.
He writes that the sanctions will also affect the goodwill that Europe has amassed over the years.
CNN also reported that Russia's economy is in a better position to withstand a shock than in 2014, when Western sanctions and plummeting oil prices combined to knock roughly 2.5 per cent off the country's GDP and spark a financial crisis. Russia' balance sheet is stronger, its external debt is lower, and its financial connections with major economies are smaller.
Elizabeth Shackelford, a former US State Department official, was quoted as saying to CBC that the effectiveness of the sanctions would depend on how well the US and its allies can stick together.
With inputs from agencies