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Sanctioning Russia: Where Does the West Go Next?

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Sanctioning Russia: Where Does the West Go Next?

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    After a hesitant start, the West has responded to Russia’s invasion of Ukraine with exceptional collective unity, resolve and speed. One of its main weapons in countering the vicious offensive that Vladimir Putin has inflicted on Ukraine has been far-reaching financial and economic restrictions. These sanctions have put enormous pressure on the Russian economy and will over time constrain the Kremlin’s capacity to wage its illegal war. But exactly a month after the start of the conflict, Western leaders need to take stock of their sanctions and fine-tune their response. Now is the time to be clearer about the precise objectives they want the sanctions to achieve in the weeks and months ahead, and to recalibrate their policies accordingly.

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    How the West Has Responded

    In the build-up to Russia’s invasion of Ukraine, the West’s sole focus was diplomacy. Strong words from EU leaders and the governments of the United Kingdom and United StatesOEM 2013-2016 Infiniti JX35/QX60 Overhead Roof Dome Maplight Panel 26430-3JA7A,CNP Bags Brown Pebbled Leather Satchel fits Tablet lots of pockets,

    In the first days of the invasion, the West’s response was limited to trade restrictions and sanctioning a small number of individuals among the powerful Russian elite by freezing their assets deposited abroad. Following this hesitant start, the Western alliance imposed an unprecedented array of sanctions. Foreign reserves of the Central Bank of Russia have been frozen, access to the SWIFT global financial messaging system has been suspended for several state-owned banks, assets of numerous Russian financial institutions frozen and access to Western financial markets restricted. In a later move, the US and UK governmentsSony PS4 Wireless Headset PLAYSTATION 4 imports of Russian oil into their countries and, together with the EU, expanded the range of businesses and people who are subject to sanctions. The EU continues to import commodities but hasKate Spade Bow Purse, an ambitious plan to cut Russian gas imports by two-thirds before the end of 2022. During the past month, with the specific aim of ratcheting up pressure on the Kremlin, Western governments have continued to roll out fresh measures, deepening their import and export restrictions, financial sanctions and restrictions covering powerful Russian individuals. Some of the most significant measures are summarised in Figure 1 below.

    Figure 1 – An overview of sanctions against Russia (as of 22 March, non-comprehensive list)

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    • Freezing of the foreign reserves of the Central Bank of Russia (UK, US, EU and Canada)
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    Financial sanctions

    • Exclusion from SWIFT, the global financial messaging system, for several large Russian financial institutions (UK, US, EU and Canada), including SberBank and VTB (US and UK), and several Belarusian banks, including Bank Dabrabyt, Development Bank and Belagroprombank (EU)
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    • Freezing of assets of state-owned Belarusian banks, including Belinvestbank and Bank Dabrabyt (US)
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    • A ban on listing the shares of Russian state-owned entities (EU); on the issuance of new Russian sovereign bonds (Japan); on sterling clearing through UK and Russian companies from the issuing of transferable securities and money-market instruments (UK); and on the dollar clearing for Russian financial institutions (US)

    Economic and trade restrictions

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    • Restrictions on providing certain services that relate to some sanctioned goods and activities, including technical assistance and engineering services related to selected sectors and the supply of tourism services (UK, US, EU, Switzerland and Australia)
    • A wide range of import restrictions, including a ban on Russian crude oil imports (US, Canada and Australia); the phasing out of gas by the end of 2022 (UK); and a ban on natural gas and coal, and other raw materials (US)
    • A ban on the import of targeted goods from Russia, such as agri-food products and raw materials including steel (EU, US and Canada); plus all goods originating from Russia (Australia)
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    Restrictions on persons

    • Restrictions on providing assets to designated persons and on dealing with the assets of designated persons (asset freezes), covering the Russian elite and including members of the government, the State Duma and businesspeople (UK, US, EU, Switzerland, Australia and Canada); plus lists of designated persons that varies country by country
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    • Ban on Russian planes using airspace (UK, US, EU and Switzerland)
    • Ban on Russian ships using ports (UK, EU and Canada)

    Source: TBI

    As the scope of sanctions has expanded, so too has the Western alliance against Russia. The coalition, initially led by the UK, US and EU, has rapidly grown to include Switzerland, a historically neutral country, which has matched the EU’s sanctions. Canada has introduced bans on major Russian banks and crude oil imports as well as on Russian planes from using its airspace. Japan has prohibited the use of its financial messaging system and introduced export controls. South Korea has joined the SWIFT ban and restricted Russian banks in its markets. Even Singapore, a state usually reluctant to meddle in foreign affairs, has imposed export controls on items that could inflict harm to Ukraine and blocked financial transactions linked to Russia. At least 41 countries have taken individual action to impose sanctions on Russia so far.

    It is inconceivable that Moscow would have failed to factor in a price of the response when it decided to launch its invasion. Some sanctions had already beenGuess crossbody purse,Nike Air Max 90 Triple White CN8490,come as a surprise to the Kremlin, which assumed that division within the West, and the EU in particular, would prevent them from taking tough decisions. The most significant of all was the move to target nearly half of the $650 billion in foreign-exchange reserves that the Central Bank of Russia prudently amassed to “sanction-proof” the economy in a moment of crisis. The measure was laterAdidas Outdoor Terrex Voyager 21 Travel Hiking Shoes Men 10.5 All-Terrain FW9399 by Putin as “akin to an act of war”.

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    Prosperity Crossbody Bag, evidence suggests that sanctions work best when they impose high costs on the targeted economy, when they are imposed by several countries at once and when they aim to achieve specific security goals rather than major policy objectives, such as a regime change. But they are much less effective when they are imposed on autocracies rather than democracies and when the sanctioned countries assume the conflict will continue. Throughout much of the 20th century, they have worked better against smaller states and often backfired against larger, authoritarian ones – as recent research by Nicholas Mulder on the history of sanctions shows.

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    Yet even though sanctions have failed to deter Russia, their punitive effects are not insignificant. Punitive measures send an important signal to other countries that violating the territorial integrity of a sovereign nation comes with serious costs. They also restrict Russia’s ability to trade and import technology, weakening the underlying capabilities of its economy and its ability to sustain the war without the involvement of other countries. But these measures should not be relied upon to accomplish deterrence – without considering how they may be used more strategically.

    Taking Stock: What the Sanctions Mean for Russia

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    The Western sanctions have had an immediate and substantial impact on the Russian economy. The value of Russia’s currency is down by 45 per cent this year, putting it on track for the biggest fall since 1998 when Russia defaulted on its rouble-denominated debt. The Central Bank of Russia has more than doubled its interest rate, from 9.5 per cent to 20 per cent, and imposed monetary capital controls in an effort to stabilise the currency. The freeze on central-bank reserves has shrunk Russia’s large foreign-currency reserves, curbing its ability to draw on almost half the $650 billion that could be used to prop up the rouble and offer liquidity to the banks under sanction. As Russia’s financial system comes under heavy strain from sanctions, the chances that the country will default on its debt for the first time since 1998 are considerableAsics Gel Nimbus 22 Running Shoes Mens 7 White Black Lace Up Low Top Sneakers,

    There has been an exodus of Russian assets and businesses since the invasion: asset-management companies have frozen funds with Russian exposure or had their value written-down altogether; Moscow’s stock market has been mostly closed, and shares in many Russian companies have plummeted in value. Doing business with Russia has, for most Western companies in this environment, become both impossible to navigate and reputationally risky. In cases where restrictions have not involved an outright trade ban with the country, their costs have increased substantially, with a large number of companies voluntarily deciding3 Pennington Wildflower Seed Mixture for Hummingbirds Bees Butterflies 1.5 Lb.,EXPRESSIONS NYC purple and silver flip sequin heart-shaped clutch crossbody bag foreign assets in the country, the risks of staying in Russia are significant. The growing concern for foreign firms and investors now is that the measures may over time expand to “secondary sanctions” that would hit companies doing business with banned entities. An early exit from Russia is, therefore, a cheaper exit.

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    Beyond the immediate effects, sanctions are likely to push the Russian economy into a recession worse than seen during the 1998 crisis, with increasing inflation and cost of living for Russian households. The country’s gross domestic product (GDP) is expected to fall by 12 per cent this year, according to a White Leather and Straw Kate Spade Handle Bag, by JP Morgan, with inflation rising to between 11 per cent and 17 per cent during the same period, in what is fast becoming one of the worst years for the Russian economy in its post-Soviet history. Sanctions are bound to constrain Russia’s ability to maintain the underlying technological capabilities necessary to wage its war against Ukraine. Russian leaders will therefore need to look for help elsewhere, for example by requesting that China and its partners in Central Asia ramp up exports.

    Looking ahead, the impact of sanctions will depend on whether, and for how long, Western countries choose to sustain them and how assertively European countries move to restrict their dependence on commodities imports. Even though aggressive sanctions have squeezed Russian accumulated stocks, they have done little to stop the flows into the Russian economy. The country is still receiving up to $2 billion of foreign-currency income a day for its crude oil and gas, with over Graptoveria ‘Victor Kane’ Succulent combines bonsai old trunk live rooted get 2, from European countries. Since 24 February, the day when Russia invaded Ukraine, EU countries have weatherman foamsNissan rogue 2009 door lock,Danner Vital 400g Insulated Waterproof Hunting Boots for Men size 11.5D by the Europe Beyond Coal campaign and the Centre for Research on Energy and Clean Air. Russia’s ability to receive daily payments for its lucrative energy supplies – which exporters now have to2 Xbox one s controllers,

    The political fallout is much harder to anticipate. The sanctions will put pressure on individuals linked to the Kremlin, but whether this translates into pressure on Putin to alter his calculus is harder to tell. The byproduct of comprehensive sanctions is a hit to the economy, with ordinary Russian households and small businesses being punished for the actions of their political leaders. Whether Putin cares about the damage that sanctions are wreaking on the real economy or not, he is already using them to trigger a “Nike air Jordans,” movement, framing the Western response as a plot to punish the ordinary Russian people.

    Looking Ahead: What the West Should Do Next

    What the West Should Do Next

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    Imposing sanctions is generally easier than deciding when to start lifting them. The difficulty is not only that the decision to ease sanctions depends on our best judgement about the future intentions of the sanctioned country, but also that it might spark division among the coalition of countries imposing the sanctions. Signalling to the Kremlin under which circumstances sanctions could be eased could, in theory, alter Putin’s calculations, especially if the Russian president searches for a way to save face and the West is willing, with the express agreement of Ukraine, to facilitate an “off-ramp” for the Kremlin. But by withdrawing sanctions too early and inconsistently across the countries, the risks are not only that leverage over the adversary could be undermined but also that the effectiveness of sanctions could wane as an instrument of coercion in the future. It is important that Western leaders consider these trade-offs now. Whichever path they choose to pursue, they must also ensure that public messaging around their goal is united and consistent.

    In addition to having a clearer strategy, the West also needs to recalibrate its response as the space for rolling out further sanctions is becoming increasingly constrained. It is always possible for individual governments to expand existing restrictions to an even greater number of entities and sectors, in much the same way as they have done in the past few weeks. There is also scope to be more aggressive in seizing the Russian assets of individuals linked to the Kremlin, although swift asset expropriation in many countries requires changing national laws. But the most significant measures – which would curb hard-currency flows by sanctioning imports of Russian commodities – remain controversial for EU countries because of their high economic and political price. Without imposing an embargo on energy imports from Russia to Europe, the West will always stop short of imposing maximum pressure on the Kremlin.

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