On February 24, 2022, Russian troops entered Ukraine as Putin announced “military action” in the country. Many countries were quick to condemn this act of aggression that some fear could trigger a Third World War. Still, NATO didn’t want to send troops to fight in Ukraine in order to divert such a crisis.
Instead, world leaders hit Russia with dozens of different sanctions that already greatly affect the biggest country on Earth. We decided to take a deeper look into the sanctions imposed by the United States and other countries that support the Ukrainian struggle.
SWIFT
Perhaps the harshest sanction that could hit Russia was its dismissal from SWIFT. Let us briefly explain what SWIFT is and how members benefit from it. SWIFT is the abbreviation of Society for Worldwide Interbank Financial Telecommunication. It was founded as a way for banks worldwide to communicate and execute transactions more easily.
More than 11,000 financial institutions around the world use SWIFT. Thus, the decision to exclude Russia from this enormous financial union was one of the most severe punishments for the invasion. The United States, along with the United Kingdom, and the European Union decided to exclude Russian banks from SWIFT in late February.
What this means for Russian financial institutions is that they would have to directly communicate with foreign banks, which would be more time-consuming and costly. However, not all Russian institutions were banned from SWIFT.
Russia is the second biggest producer of natural gas, just behind the US, and the whole of Europe relies on this precious resource. Gas prices were already rising before the invasion and Europe simply could not afford to cut all ties with Russia. Hence why the EU excluded 7 Russian banks, but kept those that handle energy payments.
The United States was the country that pushed the hardest for the SWIFT ban, but it took some persuasion for the EU to agree due to its dependency on Russian gas.
In addition, Biden prohibited transactions with the Russian Central Bank, so Americans can no longer do business with the bank. The Russian Direct Investment Fund, the Russian National Wealth Fund, and the Russian Ministry of Finance were also targeted in the ban.
It’s also important to note that Russia was banned from trading in dollars and euros, by the US and the EU respectively.
Confiscating Property
In his first State of the Union Address, Biden discussed the situation in Ukraine and the even harsher sanctions he considers. One of them is concerned with the property and finances of Russian nationals in the US. Biden threatened Russian billionaires and those connected to the regime.
The U.S. Treasury is now looking at their assets and might seize property such as mansions and yachts. This effort is mirrored in the European Union, and the White House announced in a tweet that they are preparing a Transatlantic task force to identify and potentially seize assets belonging to Russian oligarchs.
Some were quick to leave the US and the EU and head to countries that don’t have extradition orders. They took with them their super yachts and expensive cars. The president of Lukoil, the Russian energy corporation, recently left for Montenegro with his mega-yacht Galactica Super Nova.
One billionaire, Igor Sechin (boss of energy company Rosneft), already had his yacht seized by French authorities as he was trying to sail off from Marseille.
Europe and the US also targeted specific Russian billionaires with travel bans and froze their assets. Some of these billionaires were summoned by Putin to Kremlin on the day of the invasion in order for him to explain his rationale and allow them to prepare for the sanctions. That’s why the US and the EU specifically targeted these people.
Currently, there are 16 people on this Russian billionaire black list.
Flight Banning
The United States forbade Russian planes from using its airspace, essentially banning travelling from Russia to the US. It was not the first country to do that. The United Kingdom, along with Bulgaria, Poland, and the Czech Republic did it first on February 25. Many other European countries followed suit.
In response to these sanctions, Russia banned all EU nations from flying over its territory, which seriously impacts travelling from Europe to Asia. New routes would have to be found to resume normal operations, or at least near-normal operations.
Consequences
The sanctions quickly delivered economic devastation to Russia. The ruble is in shambles, having lost between 25 and 40% of its value. The European subsidiaries of Russian banks are also struggling to operate with clients taking out their assets to prevent further losses. The Russian Central Bank had to double its interest rates, peaking at 20% as of right now.
The Russian stock exchange had to close down for a few days, which is obviously really bad for business. Russian companies such as Gazprom and Lukoil saw their stocks plummeting, losing over 90% of their value despite the fact that Russian gas is still flowing freely to Europe.
Putin continues to hold talks with the country’s top economists to avert further devastation. According to some prognoses, the Russian economy might shrink with 5%. Russia expected sanctions, but perhaps it didn’t expect them to be so harsh. You know things are bad when neutral Switzerland joins in the effort.
