As Moscow initiated a full-scale military assault on Ukraine early Thursday morning, launching airstrikes and artillery at military installations across the country and sending troops into major cities, officials in Washington rushed to determine how best to punish Russian President Vladimir Putin.
”Putin is the aggressor. Putin chose this war. Now he and his country will bear the consequences,” President Biden said Thursday, noting that the sanctions had been designed to maximize the long-term impact on Russia’s economy.
Biden announced new limitations on what can be exported to Russia, “blocks” on four additional Russian banks, including state-owned banks VTB and Sberbank, and further sanctions on Russian elites. The sanctions also target the children of Nikolai Patrushev, an intelligence official with close ties to Putin, and Igor Sechin, head of the Russian oil company Rosneft.
Despite weeks of negotiations, members of Congress failed to come up with a bipartisan sanctions package in the month leading up to Russia’s attack on Ukraine. Lawmakers from both sides of the aisle said Thursday that they would support robust sanctions proposed by the White House and are calling for more comprehensive sanctions legislation when Congress returns next week.
“The United States and our allies must now totally isolate Russia from the global economy. This includes sanctions on all Russian oligarchs—those who actually hold Putin’s cash—and Russia’s financial and energy sectors, as well as the removal of Russian institutions from the SWIFT system,” Sen. Ben Cardin told National Journal.
The U.S., the European Union, and the United Kingdom issued sanctions against Russia earlier this week following Moscow’s recognition of the independence of Donetsk and Luhansk, two regions in Eastern Ukraine that Russian proxy forces have controlled for the past eight years.
Experts noted that the European Union’s sanctions were much tougher than many expected, while British Prime Minister Boris Johnson was slammed for failing to issue robust sanctions measures. Washington’s preliminary sanctions package was deemed limited but effective, as Biden left ample room to issue more-crippling sanctions as the situation escalates.
“What we’re seeing is the EU is tougher than the U.S.,” said Anders Aslund, an economist specializing in the Russian economy. “The British sanctions were a joke. The EU and the U.S. were working in concert, and Boris Johnson was clowning around.”
The U.S. on Tuesday sanctioned two Russian state-owned financial institutions, VEB, a bank described as Putin’s slush fund, and Promsvyazbank, an institution primarily used by Russia’s military. VEB has an office in New York that will be forced to close.
Washington also slapped sanctions on three individuals tied to Putin’s inner circle—Denis Bortnikov, Peter Fradkov, and Vladimir Kiriyenko—and placed restrictions on Russia’s sovereign debt.
Meanwhile, Biden announced he would lift the White House’s waivers on sanctions against the Nord Stream 2 pipeline. That controversial energy project would have brought Russian natural gas directly into Germany, bypassing Ukraine. Lawmakers from both sides of the aisle applauded the president’s decision.
German Chancellor Olaf Scholz, who had previously resisted making public statements about the pipeline, said German regulators would not certify the project. That move will cost Russia billions of dollars.
The European Union sanctioned hundreds of individuals, including Russia’s defense minister and the 351 Russian parliamentarians who voted to recognize the independence of Donetsk and Luhansk. Brussels also targeted several people associated with Russian state-owned media, including RT editor-in-chief Margarita Simonyan, a move Washington is not expected to replicate due to the U.S. deference to First Amendment rights. These individuals are now subject to asset freezes and visa bans in Europe.
Neither the U.S. nor the EU issued export controls in the first round of sanctions, however.
The international community has several options when it comes to sanctioning Russia. One of these is to sanction specific financial institutions operated by people close to Putin, like Gazprombank, Sberbank, and Alfa Bank—which were all targeted Thursday. Another is to issue export controls on items such as semiconductors, which would cut Russia off from Western technology used for military development, and luxury goods.
“We’re going to stunt the ability to finance and grow the Russian military. … We’re going to impair their ability to compete in the high-tech 21st-century economy,” Biden said Thursday.
Targeting more individuals close to Putin, or even Putin himself, is also on the table.
Sanctions targeting specific sectors of the economy, like energy or metals, and the oligarchs who run those industries could also be painful for Russia. Still, they risk producing a blowback effect on Western economies. Experts expect the U.S. and its allies will continue to ramp up sanctions as events on the ground unfold. But decoupling Russia from the global economy will be difficult.
“I think given how severe this invasion is, they’ll start with a pretty high-level implementation to begin with and leave themselves some room to maneuver,” said Fritz Lodge, a principal with the Scowcroft Group specializing in international economic policy.
“But Russia is not Iran. This is the 11th-largest economy in the world,” Lodge added. “It’s deeply connected to the rest of the global economy. It’s a major commodities exporter—not just energy, but it is also the largest wheat exporter in the world and a significant exporter of fertilizers, chemicals, and industrial additives. There will be painful side effects for European economies and the U.S. with these sanctions.”
Russia, furthermore, has amassed significant foreign-exchange reserves estimated to be worth a little over $600 billion and has already reduced its reliance on foreign investment. Both moves will insulate Russia from international sanctions for at least a few months.
“You can think of Putin as a geopolitical doomsday prepper,” Lodge said. “If he’s taking these actions, then he’s priced in the fact that it would incur these sanctions.”
Many experts have called into question whether sanctions have the power to change Putin’s calculus. International sanctions issued in response to Russia’s annexation of the Crimean Peninsula failed to stop the country from intimidating and ultimately attacking its neighbor, and made only a small dent in Putin’s popularity. Often, the impact of sanctions takes a long time to materialize, experts note.
“Sanctions are not a magic bullet,” said Daniel Fried, who was the State Department’s sanctions coordinator when Russia seized Crimea in 2014. “Sanctions can work, but the timeline for them working might mean that the Ukrainian people suffer horribly. We often overestimate what we can achieve in the short run and underestimate what we can achieve in the longer run. But the Ukrainians are living in the window of short-term war. ”
Still, Aslund noted that Putin has frequently expressed displeasure when people close to him are sanctioned, arguing that prohibitions on Russians spending money in Europe amount to human-rights violations.
“He’s very sensitive, really a bleeding heart when it comes to his friends,” Aslund said.