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Ukraine: What sanctions could be imposed on Russia? Ukraine: What sanctions are being imposed on Russia?
(30 days later)
Both countries have been building up forces along the border as tension continues to escalate. Western nations have imposed severe sanctions on Russia following its invasion of Ukraine.
Western powers are threatening severe economic sanctions against Russia if it were to invade Ukraine. The measures are designed to cripple Russia's economy and punish its government for taking military action.
Western diplomats are refusing to be explicit about specific penalties to keep Russia guessing and maximise their deterrent effect. So what sanctions might the West be planning? What is a sanction?
Financial restrictions A sanction is a penalty imposed by one country on another, often in order to stop it acting aggressively or breaking international law.
One measure being considered would be to exclude Russia from the system known as Swift - a global financial messaging service. It is used by many thousands of financial institutions in more than 200 countries. Sanctions are often designed to hurt a country's economy, or the finances of individual citizens such as leading politicians. They can include travel bans and arms embargoes.
Boris Johnson told MPs that banning Russia from this would be a "potent weapon". It would effectively make it very hard for Russian banks to do business overseas. They are among the toughest measures nations can use, short of going to war.
This sanction was used against Iran in 2012 and the country lost significant oil revenues and a large chunk of foreign trade. What sanctions are Western nations imposing?
Both US and Germany have voiced doubts and asked if the cost to cut off Russia from SWIFT would be too high. Both the UK and the EU have announced plans to sanction Russian President Vladimir Putin and foreign minister Sergei Lavrov.
But this sanction would have an economic cost for countries like the United States and Germany whose banks have close links to Russian financial institutions. The UK also announced:
Dollar clearing all major Russian banks to have their assets frozen and be excluded from the UK financial system
The US could ban Russia from financial transactions involving US dollars. Essentially, any western firm that allowed a Russian institution to deal in dollars would face penalties. laws to stop major Russian companies and the state raising finance or borrowing money on UK markets
This would mean that Russia would be extremely limited in what it could buy and sell around the world. asset freezes on new individuals or entities
This could have a huge impact on Russia's economy as most of its oil and gas sales are settled in dollars. Russia's Aeroflot airline will be banned from the UK
Sovereign debt export licences suspended for dual-use items which can be used for military purposes
Western powers could take action to block further Russia's access to international debt markets. a stop to exports of high-tech items and oil refinery equipment
The ability of Western institutions and banks to buy Russian bonds is already restricted - those curbs could be tightened. a limit on deposits Russians can make to UK bank accounts
This would deprive the country of access to finance that it needs to grow its economy. The country's cost of borrowing might rise and the value of the Rouble might fall. EU nations sanctions also include:
Russia has prepared for this by reducing the amount of debt held by foreign investors. targeting 70% of the Russian banking market and key state owned firms, including defence firms
State-owned Sberbank is one of the biggest Russian banks that's sanctioned by EU. targeting the energy sector with an export ban on materials Russia uses for oil refineries
Block the banks banning the sale of aircraft and equipment to Russian airlines
The US could simply blacklist some Russian banks, making it almost impossible for anyone in the world to conduct transactions with them. limiting Russia's access to high-tech, such as semiconductors and software
Moscow would have to bail out the banks and do what it could to avoid inflation rising and incomes falling. US President Joe Biden announced:
This would, though, have a major negative impact for western investors with money in those Russian banks. four major Russian banks will have their assets frozen and be cut off from US dollar transactions
Targeted export controls sanctions on wealthy Russian individuals with close links to the Kremlin
The West could restrict the export of key commodities to Russia. the US and allies will cut off more than half of Russia's high-tech imports to stop it developing its military capabilities
The US could, for example, stop companies selling any goods containing American technology, software or equipment. Germany has put on hold permission for the Nord Stream 2 gas pipeline from Russia to Germany to open.
This could involve, in particular, semiconductor microchips, which are used in everything from cars to smart phones, machine tools to consumer electronics. Australia has imposed sanctions on wealthy Russians and over 300 members of the Russian parliament who voted to authorise sending Russian troops into Ukraine.
This would target not just Russia's defence and aerospace sectors, but whole swathes of its economy. Japan is sanctioning Russian financial institutions and individuals and halting exports of goods such as semiconductors.
Energy restrictions The UK, US and Australia are also extending financial sanctions on Belarus for its role in the assault on Ukraine.
Russia's economy is hugely dependent on selling gas and oil overseas. The sales are huge source of revenue for the Kremlin. Why is Putin ordering troops into Ukraine?
The West could make it illegal for countries and companies to buy oil from the big Russian energy giants such as Gazprom or Rosneft. Russia's plan to fight back against new sanctions
Some German politicians are reluctant to halt Nord Stream 2 because of the negative impact on Europe's economy. Russia loses Champions League final
A new gas pipeline under the Baltic Sea from Russia to Germany - called Nord Stream 2 - could be abandoned. It is ready to start operations but still awaiting regulatory approval. Germany has blocked the Nord Stream 2 pipeline from Russia from coming into operation
But, any curbs on Russian gas would raise prices across Europe, much of which is dependent on energy from the east. How will these sanctions affect Russia?
Individuals targeted Banning exports of high-tech goods to Russia - such as semiconductor microchips - could affect Russia's defence and aerospace sectors and industries such as car production.
New sanctions could be targeted at individuals, including not only associates of Vladimir Putin but also the Russian President himself. The measures taken against Russian financial institutions are intended to cause a big fall in the country's currency, the rouble, and a financial crisis.
This would most likely involve punishing acts of hostility against Ukraine or threatening its sovereignty or territorial integrity. The Russian government might have to bail out the banking system, at great expense. However, it has built up reserves of over $630bn (£464bn) to deal with economic shocks.
Asset freezes and travel bans are the most likely options. But many such sanctions are already in force and have yet to change much Russian behaviour. The UK government has also threatened further action against Russian money in London financial institutions and banks. It has promised to push through long-delayed measures requiring people to say where their cash comes from.
The hope of US and European powers is that Russia's elite would put pressure on Mr Putin if they were unable to access their wealth in foreign countries and educate their children in western schools and universities. How much Russian money is there in the UK?
London clampdown What other sanctions could Russia face?
Some sanctions could be imposed to restrict the ability of Russian individuals to invest and live in London. Western nations are lining up harsher sanctions. Options could include:
UK government has vowed to tackle illicit Russian money flowing into London. Excluding Russia from Swift
Such is the scale of Russian money in banks and property in the UK that the capital has been dubbed "Londongrad". Swift is a financial messaging service which allows quick international transactions and is used by 11,000 financial institutions in 200 countries.
The UK government claims it is tackling this problem with "unexplained wealth orders", which require people to say where their cash has come from. Ukraine has called for Russia to be excluded from it immediately.
But only a handful of these orders have ever been used. Some US organisations want the White House to push the UK harder on this. A ban would delay the payments Russia gets for exports of oil and gas.
Difficulties for the West When Swift banned Iran in 2012 - under pressure from the US - that country lost almost half of its oil export revenues and 30% of foreign trade.
The main difficulty for the West is to decide what sanctions should be imposed and when. There are differences between countries on this. However, Russia could get paid through other systems - for example, China's Cross-Border Interbank Payment System.
How much should the sanctions depend on the scale and nature of any Russian attack? If, to quote President Biden, there was a "minor incursion", what sanctions would be justified? And who should deploy them? Explaining why the US had not used Swift as a sanctions weapon, President Biden said: "The sanctions that we are proposing on all their banks have the equal consequence, maybe more consequence than SWIFT, number one.
When asked about this, US officials say there is unity of purpose but admit there might be a "division of labour" with different countries imposing different sanctions. "Number two, it is always an option but right now that's not the position that the rest of Europe wishes to take."
Russia could also mitigate the impact of western sanctions by looking to China and other allies for support. What is Swift and why are leaders divided on sanctions?
The bottom line is that the most effective economic sanctions often come at a high price for those who impose them. There are trade-offs and not everyone in the West is willing to acknowledge them. Blocking Russian gas and oil exports
Oil and gas makes up a fifth of Russia's economy and half of its earnings from exports.
As such, refusing to buy its oil and gas would be a very tough sanction.
However, it would also be damaging to Western nations that rely on it.
Russia supplies 26% of the EU's crude oil and 38% of its gas. Even a brief cut in gas supply would raise energy prices.
Rossiya Bank is one of five banks sanctioned by Britain
How has Russia reacted to the sanctions?
Russia's foreign ministry has threatened sanctions of its own against the West. This may include reducing or shutting off gas supplies to Europe.
British airlines have now been banned from Russian airspace or landing at Russian airports.
Hitting the Russian banking sector is likely to damage firms which do business in Russia, or have assets in its banks, and the export ban on high-tech goods will hit many Western manufacturers.