By Jonas Balkus
Over the past two months, news feeds and channels have been dominated by what has become the largest conflict on the European continent since the Second World War. With this coverage comes a rolling list of sanctions imposed on Russia by Western governments and their allies. These sanctions are the most severe metered out in modern history; the devastating impact that they have had upon the Russian economy within merely weeks attests to this. But what sanctions have been imposed? And which ones promise to have the greatest impact upon Russia?
Sanctions have continuously been levied against Russia since the beginning of the Ukraine crisis in 2014. Initially, sanctions were only imposed on a limited number of individuals and companies in response to the annexation of Crimea. However, sanctions became more punitive following an escalation of the war in Donbas. The US banned transactions with several major Russian companies such as Rosneft, and restricted access of Sberbank (Russia’s largest bank), to the US debt market among others. Meanwhile, Japan froze the assets of individuals complicit in Crimea’s annexation and the EU announced an arms embargo against Russia. All these measures contributed to a prolonged financial crisis from 2014 to 2016. By the end of this crisis, Russia’s economy had reportedly lost close to $170 billion from sanctions, and has arguably not recovered since.
But these measures are dwarfed in severity by the sanctions of the past two months. The punitive actions of the UK on Russia, a country which had hitherto been a base for Russian business dealings, are a good example of the sanctions being imposed by the international community. Immediately after the invasion, the Foreign Office announced plans to freeze the assets of all Russian banks in the UK, preventing Russian companies from raising finance in UK markets, an export ban on electronics, telecoms, and aerospace material, and individual economic sanctions on 571 members of Russian state legislatures. At the beginning of March, the UK had sanctioned more Russian banks than any other country. On 24th February, the Foreign Office described the asset freeze (in co-operation with the US) of a major Russian bank, VTB, as “by far the single biggest financial sanction in history”.
Elsewhere in the world, Russia has mostly been cut off from SWIFT, and flights from Russia have been banned from most European airports. The EU announced restrictions to capital and financial markets for Russian businesses as well as a complete ban on transactions with Russia’s central bank.
Yet, what has been one of the most impactful moves on the Russian economy is the widespread private boycott of Russian goods and services by companies and individuals. The actions of companies such as Boeing, for example, refusing to supply Russia with plane parts and manuals will prove devastating in the long run.
The impacts have already been felt. The Russian rouble has fallen to historic lows, the Russian stock market has crashed, and Russian companies’ share prices have tumbled. Some of the most extreme losses include Sberbank, the stock prices of which have shrunk almost three times after the invasion. Thus far, the various bans on business between Russian and foreign companies have been the most effective tactic, given the reliance of Russia on commerce with the West and western financial centres. Cutting them out of these economic spheres puts them at the mercy of their only other major market— China— thereby giving Beijing considerably more influence over the Russian government. A decision which may harm Russia’s long-run economic prospects and international standing even further.
In short, the current bout of sanctions seems to be devastating the Russian economy. Nonetheless, the holistic impact of sanctions on Russia will only become apparent in the coming months. While Russia’s economy may well be crippled, the Russian propaganda machine could still skilfully twist the narrative into one of Western malice towards the Russian public, lessening the possibility of a popular overthrow of the government. In the past, sanctions have never toppled governments on their own. They were almost always accompanied by military conflict. Yet, now we live in a world that is more interconnected than ever, perhaps sanctions will bite harder and be felt for far longer than in previous years.
Image: Jason Leung via unsplash