US threats and economic sanctions await Russia if it invades Ukraine

Many Russian individuals and companies are already subject to a wide range of sanctions due to Russia’s 2014 annexation of Crimea, and the sanctions doubled after 2016 due to Russian interference in the presidential elections, and the United States added more sanctions due to what it says are the result of cyber attacks on it, and human rights violations. Human Rights, Use of Chemical Weapons, and Dealing with North Korea, Syria and Venezuela.

A question is widely asked in Washington about what other additional sanctions Washington and its Western allies can impose on Russia to deter it from the expected invasion of eastern Ukraine, according to US intelligence assessments.

Expensive and destructive

And US President Joe Biden repeated - on Saturday and Sunday - that he made it clear to Russian President Vladimir Putin that Russia will pay a "heavy price" and will face devastating economic consequences if it invades Ukraine.

"I have made absolutely clear to President Putin that if he moves towards Ukraine, the economic consequences for his economy will be devastating," he added.

At a hearing Tuesday last week, Senator Bob Menendez issued the strongest warning from congressional leaders to Russia, telling the Russian president, "Invade Ukraine, and we will destroy your economy."

"I want to say very clearly to those who are listening to this session in Moscow, Kiev and other capitals around the world: a Russian invasion will lead to devastating economic sanctions, the likes of which we have never seen before," said Menendez, who serves as chair of the Senate Foreign Relations Committee. ".

Experts and former sanctions officials indicated that potential targets include Russian banks, state-owned companies, the Russian Direct Investment Fund, and the business class close to the Kremlin, and other options are to isolate the country financially from the "SWIFT" mechanism and expand the scope of the imposed sanctions. On the Russian sovereign debt trade in the international market.

Biden made it clear to Putin that Russia would pay a heavy price and face devastating economic consequences if it invaded Ukraine (Al-Jazeera)

Swift weapon

John Smith, former director of the US Treasury's Office of Foreign Assets Control, points out that the crux of the severe sanctions is to tell Putin, "If you're going to launch a military war, we're going to have an economic war."

Since the United States and European countries imposed sanctions on Russia since 2014, Russia has been able to withstand economically, especially with the rise and then stability of oil and gas prices at good levels for exporters, and there is no longer a significant impact of the sanctions, according to a report of the Council on Foreign Relations before the end of 2019.

Financial experts believe that Washington has a powerful, effective and very painful weapon, which it has not resorted to before, which is the Swift weapon (Society for Worldwide Interbank Financial Telecommunication). Through a specific code for each bank called "Swift Code".

One of the particularly painful options, experts say, is to separate Russia from the international SWIFT system of payment, which means blocking and withholding a large part of Russian income in hard currencies that it receives in exchange for selling oil, gas and the rest of its other exports. Among most countries of the world.

Russia relies on the SWIFT mechanism to export oil and gas so much that in 2019 its then-Prime Minister Dmitry Medvedev said blocking it would be a "declaration of war".

US National Security Adviser Jake Sullivan has indicated that his country is ready to go beyond the 2014 sanctions, and stated that a wide range of options are being considered, including the possibility of Russia being expelled from the SWIFT system.

In a press briefing last Saturday, a senior State Department official indicated that it is expected that the G7 will not only join the collective application of sanctions against Russia, but that "a large number of democratic countries" will join, which will also adopt the imposition of sanctions announced by Washington.

Washington also proposes to suspend the work of the new and controversial "Nord Stream 2" gas pipeline between Russia and Germany in the event that Russia crosses the border with Ukraine.

"If Vladimir Putin wanted to see gas flowing through this pipeline, he might not want to risk invading Ukraine," said Jake Sullivan.

But these measures - as with all sanctions imposed on Russia - will also cause serious pain to Europe, as countries such as Germany and the rest of the European continent not only have strong trade relations with Russia, but a large part of the continent depends on Russia for access to natural gas that It warms its homes in the winter.

Brian O'Toole, a former US Treasury official and now an expert at the Atlantic Council, believes that the US and its European allies will target Russian banks that provide services to the Russian government elite, including the Russian Development Bank (VEB), as an early step before targeting commercial banks. Larger ones, such as Sberbank.

The selection of targets is a sensitive process, made more difficult by Russia’s great integration into the global economy, and given the dominance of the dollar and American financial markets, imposing full sanctions on giant Russian companies or banks, which essentially deprives them of the dollar and the American financial system, which would send a message Powerful to President Putin.

An economist believes that America will target Russian banks that provide services to the Russian (European) government elite

Impact of sanctions on the Russian economy

It is difficult to quantify the extent of the damage further sanctions will cause the Russian economy, but the International Monetary Fund estimated in 2019 that the sanctions curbed Russian growth by 0.02% between 2014 and 2018.

The Russian government has sought to protect the economy from the shock of sanctions, develop an alternative to the SWIFT mechanism, reduce dependence on the dollar, and build a Russian investment fund.

Financial sanctions would cause great chaos in the short term, both within Russia and for international companies doing business there, because they would stop almost all international transactions, but Russia, since 2014, has been developing its own system of remittances, which now accounts for about 20 % of all domestic money transfers.

Many officials in the administration of former President Barack Obama believe that Western sanctions deterred Russia from progressing deep into Ukraine and pushed Moscow to the negotiating table with Kiev over de-escalation talks and the Minsk Agreement.

Russia is likely to take the threat of further sanctions into account in any decisions about military action.