- The Russian economy is already threatened with recession due to sanctions from Western powers.
- There are three types of sanctions: government sanctions, sectorial sanctions and individual sanctions.
- From banning oil to seizing the yachts of the oligarchs, the United States and its allies have embraced them all.
Western powers have stepped up sanctions against Russia in an effort to isolate the country and its economy.
Sanctions are withdrawal from trade or other financial relationships for foreign policy or security reasons, according to the Council on Foreign Relations, a US nonprofit think tank. This is a common tactic to prevent all-out war from breaking out.
This time they are part of the retaliation against Russian President Vladimir Putin after Russia invaded Ukraine. A month after the start of the invasion, the Russian economy is now at risk of falling into recession.
This is because the United States, the United Kingdom and the European Union are withdrawing all three types of sanctions. Daniel Gielchinsky, an attorney at DGIM Law, PLLC in Aventura, Fla., who specializes in commercial litigation and financial law, broke them down for Insider.
Cut off the Russian government from international systems
A prime example of one government sanctioning another government is the Western effort to block certain Russian banks from accessing SWIFT, a global communications service that clears international financial transactions. Consider a sale of Russian oil to the United States before the sanction: it would have been cleared by SWIFT.
“If you kick a member country out of SWIFT, you’re basically telling them that you can’t participate in international trade,” Gielchinsky said, adding that this is the first time in history that a group of governments has done this. “Russia has been fundamentally sidelined from the international economy.”
The United States also froze $630 billion in assets held by the Russian Central Bank, preventing the country from using that pile of international reserves to fund its attack on Ukraine or prop up the economy. Such sanctions are unprecedented, increasing the economic punishment against Russia.
Sever ties with certain businesses and industries
Because this level of sanctions involves severing ties with certain types of businesses and industries, they are somewhat of a subset of a sanction against the government, Gielchinsky said. “You say, ‘We won’t buy from them. We will not sell to them. And whoever buys or sells from them, we won’t do business with them either. “”
That was President Joe Biden’s intention when he announced earlier this month that the United States would ban all Russian energy imports, which would affect imports of Russian oil, liquefied natural gas and coal. A few days later, the United States also banned imports of seafood, vodka and Russian diamonds.
High-end exports to Russia, including high-end watches, cars and alcohol, are also on the ban list of the United States and some of its European allies. The White House has estimated these exports at $550 million a year.
These types of penalties can be “very harsh,” Gielchinsky said.
Hit key players where it hurts
Western alliances are increasingly hitting powerful Russian elites with personal sanctions. This is the rarest form of punishment, Gielchinsky said, adding it was a “very harsh” measure.
The oligarchs targeted here are what Gielchinsky calls “Putin’s inner circle of very wealthy people.”
“They support his campaigns. They support his politics,” he said. “Their companies generate the wealth, the jobs, the votes he needs to stay where he is and to move the country forward. When you call these individuals out, that’s a very strong statement, as close to calling the president himself, which just doesn’t happen.”
So far, the US, UK, EU and Canada have all frozen the assets of oligarchs in participating countries and banned them from doing business there. Some U.S. lawmakers also hope to pass legislation that would allow the federal government to seize the oligarch’s assets valued at more than $5 million, such as real estate and yachts. The measure would align with sanctions already applied by other countries, such as France, which recently seized a $120 million superyacht owned by Russian oligarch Igor Sechin.
With sanctions like this, Gielchinsky said, governments are saying, “‘We’re coming for you.'”