New Measures
In the immediate aftermath of its invasion of Ukraine on the morning of 24th February 2022, Russia is widely expected to be on the receiving end of wide-ranging sanctions imposed by the EU, UK and the US, alongside other allied nations. The new measures are expected to go some way beyond the more limited response on Wednesday 23rd February to Russia’s decision to recognise the independence of Ukraine’s breakaway regions of Donbas and Luhansk.
Alongside a swathe of new designations, both the UK and the EU have already extended the focus of their sanctions programmes and embargoes beyond from those directly involved in the destabilisation of Ukraine, to include all assets considered to be of strategic value to Russia’s economy. This brings them into line with the approach adopted by the US since 2014, and reflects a high degree of co-ordination between London, Washington and Brussels since the start of the current crisis.
Specific measures mooted by US officials have included the designation of major Russian investment banks Sberbank and VTB, the imposition of export controls and the removal of Russia from the Swift international financial payments network.
Speaking on Wednesday, UK Prime Minister Boris Johnson said that UK measures against further Russian incursions into Ukraine could extend to “stopping Russian companies raising money on London markets or stopping them even trading in pounds and dollars”. Foreign Secretary Liz Truss said that the UK would “prohibit a range of high-tech exports and further isolate Russian banks from the global economy”. Further designations of Kremlin aligned business figures with assets in London have also been widely mooted. In response to Russia’s invasion, Boris Johnson announced this morning his intention to introduce measures that would “hobble” the Russian economy.
The European Council will meet in Brussels at 8pm local time to discuss new measures. European President Ursula von der Leyen announced in a statement this morning:
“Later today we will present a package of massive, targeted sanctions.
“The sanctions will target strategic sectors of Russia’s economy. We will freeze Russian assets in the EU and stop access of Russian banks to our financial market. This is designed to take a heavy toll on the Kremlin’s ability to finance war.”
Response so Far
A feature of the new measures imposed against Russia so far in the crisis has been their relative restraint – reflective both of the need to present a set of packages acceptable to an alliance of parties with widely differing strategic interests and the importance of retaining leverage against further Russian aggression. The initial targets have continued to be focused around the Russian political leadership and defence establishment and its close allies in the commercial sphere. A feature of reporting on the measures has been the central role of senior figures in the administration of US President Joe Biden, including Secretary of State Antony Blinken and Deputy Secretary Wendy Sherman, in co-ordinating with European allies – reflective of an approach which Biden has deliberately sought to contrast with that of his predecessor.
Most of the new measures to date have also drawn on existing sanctions legislation and powers. The new UK designations follow on from a 10th February 2022 extension of its legal authority to impose sanctions tied to the Ukraine conflict, extending HM Treasury’s range of legitimate targets to entities and individuals considered to be of economic or strategic significance to the government of Russia. So far these measures have only been deployed against Gennady Timchenko and Igor and Boris Rotenberg, widely considered to be close associates of President Putin, and five banks closely affiliated with the Russian defence sector and the private commercial activities of Putin and his family – Bank Rossiya, IS Bank, GenBank, Promsvyazbank and the Black Sea Bank.
The EU measures, which have so far gone further than the UK designations, relied on existing sanctions legislation to target a group of senior political and business officials. They include Defence Minister Sergei Shoigu, Presidential Chief of Staff Anton Vaino, Russia Today head Margarita Simonyan and Foreign Ministry Information and Press Department Director Maria Zakharova, as well as senior figures in the military and in the management of Russian state-owned banks. All of the Duma members who voted in favour of the recognition of Donbas and Luhansk are also sanctioned.
A further significant measure was the decision of German Chancellor Olaf Scholz to withdraw the certification which had been granted to the Nord Stream 2 gas pipeline by the government of Angela Merkel. Germany’s rejection of Nord Stream 2 reflects the close co-ordination of European measures with those imposed by the US, which introduced its own measures against Nord Stream 2 AG, the Swiss subsidiary of Russian state energy holding Gazprom which was responsible for the construction of the project.
President Biden’s package of measures against Russia, issued under new Executive Orders extending existing programmes to cover Donbas and Luhansk, has included designations of state-owned Promsvyazbank and VEB Bank and a clutch of military and economic officials, as well as prohibitions on the trading of Russian sovereign debt.
New Phase
As is now obvious, Western sanctions have little power to deter Putin from his preferred course. Russian officials have been largely dismissive of the new measures so far. Former Russian President Dmitry Medvedev, now Deputy Chairman of the country’s Security Council, tweeted on Tuesday:
“Welcome to the brave new world where Europeans are very soon going to pay €2,000 for 1,000 cubic meters of natural gas!”
It is also widely understood that the Russian economy has adapted significantly since 2014, with much less exposure to European markets. Although the new packages of measures that will be issued over the coming days are likely to include a number of high profile designations and embargoes, and generate some initial shock – the Russian stock market fell by more than 30% upon news of the invasion – any real impact will only be felt over a period of years. Perhaps decades.
Conversely, an extension of measures will also for the first time begin to put real pressure on the coalition opposing Putin. The EU, US and their allies have vastly differing levels of exposure to the Russian economy and different levels of ability to bear the economic pain of embargoes. As Dmitry Medvedev points out directly, there is already widespread anxiety regarding energy prices. Other economies look to Russia as a key market for banking services, luxury goods or industrial equipment. Or require the repayment of debts which now may not be recalled. As sanctions move into a more attritional phase, the challenge for the group opposing Putin will be to maintain a united front and to find ways to share – or mitigate – the pain these sanctions will impose on everyone.
