Ukraine crisis: what the West could do

The US, backed by Europe, has drawn up punitive sanctions to hit Russia and its leaders in the event of an invasion of Ukraine.

Jill and Joe Biden walk from Marine One after arriving at the White House. Picture: AFP

The US, backed by Europe, has drawn up punitive sanctions to hit Russia and its leaders in the event of an invasion of Ukraine.

How comprehensive the measures will be – and how effective in isolating Russia from the international financial community – remains to be seen because the full details have yet to be disclosed.

However, from authoritative briefings by senior US administration officials in recent weeks it is clear that the sanctions regime being contemplated by President Joe Biden would be the harshest ever proposed by America against Russia.

They will far exceed the sanctions imposed by president Barack Obama when Russia annexed Crimea in 2014 and could even target President Vladimir Putin.

The measures to be selected will have to take into account both the impact on the Russian economy and the consequent financial and energy-supply hit that could be suffered by the US and Europe.

Russia has endured sanctions for so long that the Kremlin will have learnt ways of softening the blow. The sanctions now on Mr Biden’s list are expected to include:

EXPORT CONTROLS

This would cut off supplies of sophisticated technologies that American companies design and which are essential for Russia’s strategic ambitions and cannot be easily replaced from any other country. This could include crucial components that are related to artificial intelligence, quantum computing, aerospace, defence and other technologies that Putin needs to industrialise the Russian economy.

SANCTIONS ON GOVERNMENT AND MILITARY OFFICIALS, BANKS AND ENERGY COMPANIES

More than 700 Russian individuals are still under US sanctions over the annexation of Crimea. New measures are likely to target the Kremlin elite, including the oligarchs. The UK could take action against the billionaires who have invested widely in property in London. Banks to be targeted could include the state-backed Russian direct investment fund, which is crucial to investing in Russia’s leading companies.

MOSCOW CUT OUT OF THE SWIFT INTERNATIONAL FINANCIAL SYSTEM

This would be a heavyweight punishment that could have unpredictable consequences as the system is used by banks around the world for global transactions. It was considered but not used after the Crimea annexation. Russia has tried to set up its own system, with marginal success.

ENDING ACCESS TO DOLLARS AND BAN ON RUSSIAN BONDS

Russia could be blocked from access to the dollar, which would make life difficult for all Russian companies that need to benefit from the US banking system. American financial institutions are already prohibited from buying Russian government bonds but further action could be taken to restrict any dealings with Russia’s bond market.

NORD STREAM 2

The natural gas pipeline between Russia and Germany is completed but not yet switched on. Biden has indicated, with unenthusiastic support by Germany, that the pipeline will remain shut. The danger is that Russia would retaliate by “weaponising” its crude oil and gas supplies to Europe, which would have a huge impact on energy prices and could lead to widespread shortages. Oil and gas export income represents about half Russia’s federal budget revenue.

PUTIN’S WEALTH

His wealth and where his money is held are two unknowns. The US Treasury has a unit capable of tracking hidden riches. The Russian government has declared that Putin had a take-home salary of $US131,900 in 2020. No mention has been made of the alleged $US200bn fortune Putin has, according to a US report.

The Times