Western deterrence weapon.. Do economic sanctions stand as a wall between Russia and Ukraine?

LONDON

- Since the outbreak of the Ukrainian crisis, the West in general and the United States have been waving unprecedented and devastating sanctions for the Russian economy, if President Vladimir Putin decides to invade Ukraine, which opens a confrontation between two powerful weapons in the hands of both sides: "Russian gas" and "Western sanctions".

Immediately after Russia announced the recognition of the independence of Donetsk and Luhansk regions from Ukraine, Britain and the United States announced the imposition of economic sanctions on Russian personalities and institutions, as well as Germany's announcement of suspending the Nord Stream 2 gas pipeline.

The sanctions weapon opens up a lot of controversy about its efficacy and its ability to push Russia to change its policy in dealing with the Ukrainian file.

Limited penalties

Britain was the first country to announce sanctions against Russian figures and institutions. The British Prime Minister approved sanctions on 5 Russian financial institutions, including banking institutions, as well as on 3 Russian billionaires, while preventing them from traveling to Britain.

In contrast, US President Joe Biden announced embargoes on the Russian Development Bank (VEB), the Russian Military Bank, and sanctions on Russia's sovereign debt, preventing it from accessing Western financing.

While Germany only announced the suspension of work on the "Nord Stream 2" gas line, with the threat to stop it completely in the event that Russia invaded Ukraine.

The philosophy of this type of sanctions is based on harming personalities and institutions related to the Russian president or his government, without affecting the structure of the Russian economy.

Limited impact

The West knows - as Moscow knows - that these types of sanctions have a limited impact on the Russian economy, because they do not strike the main nerve of the economy, and this is due to several reasons;

The first is that the US policy is gradual imposition of sanctions, because Moscow has not crossed the red line of invading Ukraine.

As for the second reason, the United States knows that it is not acting alone and that it must take into account the European Union, which is mainly linked to Russia, or rather to Russian gas, and Washington does not want to inflict significant damage on European allies that make them hesitate in any escalatory step against Russia.

The third reason is that the Russian economy depends for 45% of its income on oil and gas, and any sanctions on this sector will have dire consequences for the global economy, and not just for Russia.

In a lengthy article for US foreign policy specialists in Politico, Edward Fishman and Chris Miller admit that these kinds of sanctions have failed to "stop Russian adventures."

devastating punishments

US President Joe Biden has always repeated the phrase "destroying sanctions for the Russian economy," and thus refers to a number of cards in Washington's hands that are capable of causing great damage to Russia, and even isolating it from the global economy.

Among these sanctions is Russia's exclusion from the Association for Worldwide Interbank Financial Telecommunication (SWIFT), which includes more than 209 countries and 10,000 financial institutions around the world.

If this step is approved, it will be difficult for Russian companies and financial institutions to carry out any financial transactions at the international level, but in return it will have an impact on countries such as Germany that have huge financial exchanges with Russia.

The United States is keeping this paper for the worst scenario, which is Russia's invasion of Ukraine, and it does not seem that it may resort to it after the Russian recognition of the two Ukrainian regions.

targeting banks

The United States can blacklist major Russian banking institutions, which makes it impossible to deal with them anywhere in the world, with the exception of a few countries.

This step will also have an impact on the Russian interior, and will prompt the government to intervene to save its banking institutions, but in return, Western investments and Western funds in these banks will be affected.

Russia appears to expect sanctions of this kind at any time;

That is why the central bank has stored more than 630 billion dollars, with the purpose of protecting the economy from any violent shock.

dollar weapon

British Prime Minister Boris Johnson revealed that his country, accompanied by the United States, may go much further in imposing sanctions, especially by preventing Russia from obtaining dollars or sterling, in the event that Moscow decides to invade Ukraine.

Preventing Russia from accessing the dollar would impose a stifling economic blockade on it.

Because any institution in the world that allows Russia to deal in dollars will be affected by sanctions.

This means that Russia will find very great difficulties in selling its oil and gas to the countries of the world, because the currency used in energy exchanges is the dollar, and if the world misses Russian gas and oil, it is certain that the energy market will witness an unprecedented shock.

As for Britain, Russia's prevention of access to the pound sterling also means preventing it from reaching the financial district in London, which is the largest financial center in the world, especially since London is the preferred destination for Russian capital and the Russian rich.

But Washington and London treat with caution any punishment imposed on Russia, because in return it will harm the economy of many Western countries.