WASHINGTON (AP), The Biden administration has many options to fulfill its promise to hit Russia financially if President Vladimir Putin invades Ukraine. These include sanctions targeting Putin’s associates and cutting Russia out of the global financial system that flows money.
The United States and its European allies have not made any public mention of plans to respond militarily to Putin’s troop deployment along the border into Ukraine. This former Soviet republic has close cultural and historical ties to Russia and is now keen to join NATO and the West.
Payback could instead be about the money.
Antony Blinken, Secretary of State, this week promised financial trouble — “high-impact economic measures that were not taken in the past.” President Joe Biden said Friday that the U.S. has developed the “most comprehensive” and “meaningful set of initiatives to make it very difficult for Vladimir Putin.”
Over the past decade, the United States has already imposed a variety of sanctions against Russian entities. Many of these were triggered by Russia’s invasion of Crimea and its support of armed separatists within eastern Ukraine. The sanctions were also used by the United States to punish Russia for election interference and malicious cyber activities, as well as human rights violations.
The West has also helped Ukraine to build its military since 2014. While Putin has denied any intention to launch an offensive, his troops would be facing a Ukrainian army that is more capable of fighting back.
Russians are now subject to asset freezes, bans on doing businesses with U.S. firms and denials of entry into the United States. The West has over the years weighed greater financial penalties in its attempts to punish Russia.
This includes the so-called nuclear option, which is blocking Russia from the Belgia-based SWIFT financial payments system that moves money between thousands of banks around world.
This year, the European Parliament approved a non-binding resolution requesting that this step be taken if Russia invades Ukraine.
The United States successfully pressured SWIFT into disconnecting Iranian banks due to Iran’s nuclear program. This resulted in almost half of Iran’s oil export revenue being lost and a third of its international trade, according Maria Shagina, an expert in sanctions politics and affiliated with the Carnegie Moscow Center think-tank.
Shagina says that the impact on Russia’s economy will be “equally disastrous.” Russia is dependent on oil and natural gas exports to generate more than one third of its federal revenues. SWIFT helps make the petrodollars flowing.
Since 2014, Russia has been working to protect its domestic financial system from such a cutoff. The SWIFT cutoff could also cause indirect pain to Western economies.
John Herbst, a career diplomat and former U.S. Ambassador to Ukraine, stated Friday that while SWIFT was not off the table but would be a last resort.
This year, the Biden administration further restricted Russia’s ability borrow money by prohibiting U.S. financial institutions to buy Russian government bonds directly from state agencies. The sanctions did not target the secondary market. This leaves this step open.
Herbst also mentioned other possible targets and tools: financial sanctions against Putin’s family members; more sanctions on Russian banks, and Russia’s vital energy sector.