AS RUSSIA MOVES closer to a potential war with Ukraine, the United States, European Union and Britain have all unveiled sanctions against Russia, mainly targeting financial institutions and members of the country’s elite.

Earlier this week, Russia’s president Vladimir Putin announced a decision to recognise the independence of two rebel regions in Ukraine. 

He also claimed the entire country of Ukraine had never had a tradition of Statehood, a comment that caused concern not just in Ukraine but among global leaders who had in recent weeks suspected a wider invasion was likely.

Despite sanctions announced yesterday, the Russian parliament’s upper house has given Putin unanimous approval to deploy troops to the two breakaway Ukrainian regions that Moscow now recognises as independent.

Speaking to The Journal, Dr Andrew Cottey, senior lecturer at the Department of Government and Politics at UCC, said many of the sanctions announced this week are symbolic and unlikely to do significant damage to Russia’s economy or Putin’s close relationships.

However, stricter sanctions that are being threatened could put the Russian president and businesses in his country under pressure.

“More severe sanctions banning all or most imports or exports from a country are pretty rare so, in general, sanctions usually target banks, specific companies and maybe individuals within government who are viewed as responsible for certain aspects of policy,” he explained.

It is commonplace and has been for decades for the US, EU and in particular western countries to have sanctions of this limited type on various countries. So if you have human rights abuses, for example, in a particular country in Asia or Latin America, a western government may put limited sanctions on them.

Sanctions on banks

Britain yesterday slapped sanctions on five Russian banks including Rossiya and Promsvyazbank (PSB), Russia’s military bank.

The EU targeted Rossiya Bank, Promsvyazbank and Vnesheconombank (VEB) and Washington went after two banks and their subsidiaries, PSB and VEB, citing their role in supporting Russia’s military.

The US Treasury said both hold tens of billions of dollars in assets and “play specific roles to prop up Russia’s defence capability and its economy”.

But Dr Cottey said he does not think these sanctions will “be a very large blow” to Russia’s economy.

“What they’re saying is that western based banks can no longer interact with these banks, but most western banks or companies would have had limited interaction with these smaller and very specific banks,” he said. “I don’t think there will be a major impact on Russia.”

Sanctions on the elite

The UK also focused sanctions on three specific individuals – Gennady Timchenko, Boris Rotenberg and Igor Rotenberg – who will be barred from entering the UK. All British individuals and entities will be banned from dealing with them.

The US announced asset freezes on a number of Russian oligarchs, who the Treasury Department said were part of Putin’s inner circle and who “pillage the Russian state, (and) enrich themselves… at the expense of the Russian people”.

These individuals will also be prohibited from using the US banking system.

The EU agreed that 27 individuals and entities “who are playing a role in undermining or threatening Ukrainian territorial integrity, sovereignty and independence” would be penalised.

Some 351 members of  the Duma, Russia’s lower house of parliament, were also targeted for asset freezes and visa bans because they appealed to Putin to recognise the two rebel regions as independent.

“There have been sanctions of this kind from 2014 when Russia first intervened in Ukraine so what’s happening in the last day or so is a widening of the circle of those sanctions,” Dr Cottey said.

I think so far it’s quite limited in terms of the number of individuals targeted. What would be a next step would be to target a wider range of individuals who are in some sense connected to the regime. That could include senior ministers and senior generals. 

The German gasline

Germany yesterday confirmed the suspension of the Nord Stream 2 pipeline, which would have increased the volume of gas that can be transferred to Germany and then on to other European countries.

“This is more about political symbolism,” Coffey explained. “Germany has always had a very strong policy of trying to encourage economic engagement with Russia.

“The hope has always been, going back decades, that this would encourage political moderation. Critics of this policy of change through trade would now say that doesn’t seem to have worked, considering what’s happened.”

Stricter sanctions to come?

Dr Cottey said looking at the history of sanctions, overall they are “often not effective”.

“That being said, there are some examples such as the apartheid in South Africa, there is an argument that sanctions eventually contributed to ending apartheid – but that took years,” he said.

Further measures, targeting Russia’s financial and banking sector, high-tech imports, as well as a wider range of Kremlin-linked oligarchs, companies and energy sector enterprises, are planned, western officials have said.

Washington, however, held back on potentially damaging sanctions that had been flagged, such as excluding Russia from SWIFT, the international bank transaction system, which would make most financial transactions with the country impossible.

Dr Cottey said cutting Russian companies and banks off from this transfer network would put more pressure on the regime.

“If a Russian company trades with the west and can’t use SWIFT it’s no longer simple to pay for imports or receive payments for exports and so on,” he said.”

That’s one of the big ones that is on the agenda that would impact Russian companies and also the oligarchs in the hope that those people would potentially exercise pressure on Putin.

The US also did not impose export controls which would have cut Russian firms off from key high-tech equipment and software.

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Cottey said these kinds of measures could result in a shift in sentiment among supporters of Putin’s policies, but “sanctions aren’t an exact science”.

Russia’s power

Sanctioning Russia’s energy sector would be a calculated risk for the EU, as it imports 40% of its gas from Russia.

This gives Moscow leverage; while Europe may be able to survive without Russian imports during the coming months, over the longer term it would likely cause severe economic disruption.

“Another scenario is that Russia could retaliate by reducing or even for a period cutting off gas supplies to Germany or other European countries,” Cottey said.

However he added that this is less likely as Russia would cut off a major source of income at a time when it is already dealing with the impact of other financial sanctions.

Russia also is a major exporter of palladium, nickel and aluminium, which is at record prices. It is the world’s top exporter of wheat, and together with Ukraine accounts for a quarter of total exports of the staple grain.

Governments are aware that price increases on these commodities will filter through to consumers, hitting their purchasing power when inflation has already become a top concern for policymakers.

The next steps

Dr Cottey said it is “extremely unlikely” that the US or NATO will go for a ‘boots-on-the-ground’ approach. 

“Ukraine is not a member of Nato and President Biden and other European leaders have made it clear they will not put troops on the ground in Ukraine and risk a direct war with Russia,” he said.

“In a sense, because the Russians know this, it arguably give them a free hand in Ukraine.”

He said there are some potentially “worrying scenarios” if intense fighting breaks out between Russia and Ukraine, such as a spill over the border into Poland or an accidental hit on a US vessel in the Black Sea off the coast of Crimea, where there is a large Russian naval base.

“You could also have a situation where there are Russian jets flying over Ukraine that – intentionally or not – fly into Poland and are intercepted by NATO jets,” he explained.

“That’s where we get into scary scenarios of escalation. But one piece of good news on this is that Russian leaders are conscious of this, they are well aware of those risks and taking measures to avoid that.

“So what we’ll see is economic support for Ukraine, some NATO countries providing arms, but that’s the limit other than sanctions, in a sense Ukraine is on its own.”