The Long History of Sanctions Aimed at Putin’s Russia: QuickTake
All About the U.S. Sanctions Aimed at Putin’s Russia
(Bloomberg) -- Since 2014, the U.S. and its allies have imposed travel bans, asset freezes and economic restrictions on hundreds of Russian individuals and companies, part of a multinational effort to punish President Vladimir Putin’s government for alleged trouble-making beyond its borders and online. The sanctions have largely failed to moderate Putin’s behavior. Now that Russian forces have attacked targets across Ukraine, harsher measures are likely to follow.
1. What forms can sanctions take?
They’re primarily designed to hurt the target -- a person, a company, a group or even an entire country -- economically, through restrictions on trade, banking or access to financial assets. Sanctioned individuals may face travel bans. Companies or industries may be blocked from certain exports or imports. Sanctioned governments can find themselves unable to tap capital or debt markets. In what are known as secondary sanctions, third parties can face penalties for doing business with sanctioned people or entities.
2. How effective are they?
Travel restrictions and asset freezes aimed at individuals are little more than symbolic if they aren’t planning to travel globally and don’t have assets overseas. But broader sanctions can impose real pain. Western sanctions against Iran were credited with helping force the 2015 deal to limit its nuclear program. North Korea, by contrast, has persisted with its nuclear program despite decades of harsh sanctions. The Congressional Research Service, in a report updated in January, said that U.S. sanctions on Russia “have had a negative but relatively modest impact” on Russia’s economic growth and that it’s “difficult to determine” whether sanctions actually influence Russia’s behavior. To cause widespread economic disruption in Russia, the U.S. and Europe could block exports of computer, electronics and optical products used in producing machinery, cars and planes, write Scott Johnson and Maeva Cousin of Bloomberg Economics. One constraint on broad economic sanctions is worry over unintended collateral damage.
3. What sort of collateral damage?
An April 2018 round of U.S. sanctions in response to Russia’s “malign activity around the globe” hit Oleg Deripaska’s United Co. Rusal hardest, limiting for a time its access to the $140 billion global aluminum industry. That disrupted the global supply chain for aluminum and briefly sent prices soaring by 30%. Aluminum consumers in Europe, the U.S. and Asia, including car manufacturers, soda-can makers, the world’s biggest miners and big banks, shared in the pain. The sanctions on Rusal were lifted in late 2018 after Deripaska agreed to reduce his ownership and relinquish control. Europe’s dependence on Russian natural gas makes it vulnerable to retaliation by Russia, which cut off supplies to parts of Europe in 2006 and 2009 in disputes over pricing and alleged siphoning. A new pipeline to bring Russian gas to Western Europe, Nord Stream 2, was completed in September 2021. Its future is now in doubt after Germany halted certification of the $11 billion project and the U.S. imposed fresh sanctions on the company that built it.
4. Is there a better way?
Sanctions “are not an end in themselves and should not be treated as such,” Steven Pifer, a former State Department official now with the Brookings Institution, wrote in 2020. He urged President Joe Biden, who was then preparing to take office, to embed sanctions in a broader U.S. policy toward Russia, link them to specific policy goals understood by the Kremlin, and be willing to reverse sanctions “if Russia ceases the offending action.”
5. What U.S. sanctions are in place against Russia?
Even before Russia was targeted with fresh penalties over its activity in and near Ukraine, more people and companies in Russia had been hit by U.S. sanctions in the last decade than any country other than Iran. Some, including business magnates and close political allies of Putin, are banned from doing business with U.S. companies and individuals and making any transactions in dollars. So-called sectoral sanctions against corporate titans such as Rosneft, Gazprom, Sberbank and VTB limit their ability to do business abroad. Restrictions added by Biden stop U.S. financial institutions from participating in the primary market for Russian sovereign debt.
6. Why were the existing sanctions imposed?
The first round of U.S. sanctions was ordered by President Barack Obama after Russia annexed the Ukrainian peninsula of Crimea in 2014 and supported a separatist conflict in eastern Ukraine. More were added after U.S. intelligence agencies concluded that Moscow interfered in the 2016 presidential election, won by Donald Trump. Other U.S. sanctions were aimed at punishing Putin’s government for a 2018 nerve-agent attack on former double agent Sergei Skripal and his daughter in the U.K. Biden, upon taking office in 2021, imposed new sanctions after a review of Russia’s interference in the 2020 election, reports of Russian bounties on U.S. soldiers in Afghanistan, the hacking of Texas-based software supplier SolarWinds Corp. and the poisoning and jailing of opposition leader Alexey Navalny. On Feb. 22, Biden announced what he called a “first tranche” of new sanctions, which included freezing future purchases of Russian sovereign debt.
7. What other countries have sanctions on Russia?
The European Union slapped sanctions on Russia’s financial, energy and defense sectors in response to the annexation of Crimea in a bid to push Putin into a more conciliatory stance over the conflict in Ukraine. Japan joined in those sanctions. The EU also blacklisted six Putin allies as punishment for the attempted murder of Navalny. (The Kremlin denies involvement.) The U.K. and EU joined the U.S. in announcing additional sanctions on Feb. 22.
8. What’s left to consider?
It’s hard to predict what else the U.S. and EU might target with further sanctions, but it’s safe to say these are potential areas for action:
|Currency Markets||Restricting Russia’s ability to convert rubles for foreign currencies. This would strike at the heart of its export-driven economy|
|Global Payments||Unplugging Russia from the Swift payments messaging system. This was used against Iran in 2012 and is seen as an extreme option|
|Key Individuals||Extending asset freezes and travel bans on wealthy Russians. Biden had even said he would consider personally sanctioning Putin if he orders an invasion of Ukraine|
|Export Controls||Could target a range of sectors including avionics, machine tools and computer chips and consumer goods such as gaming consoles, TVs and smartphones|
The Reference Shelf
- A searchable database of sanctions managed by the Treasury Department’s Office of Foreign Assets Control.
- Former Atlantic Council senior fellow Anders Aslund argues the economic impact of sanctions is greater than some believe.
- Bloomberg Opinion senior columnist Timothy O’Brien explores which sanctions would hurt Putin the most.
- Further banking sanctions are seen as possible should Putin order an invasion of Ukraine.
- The Congressional Research Service summarizes U.S. sanctions against Russia.
- QuickTake explainers on the Swift payments system, Russia-Ukraine tensions, sanctions as financial warfare and Russian gas.
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