Russia-Ukraine conflict: Sanctions imposed by Western countries
on Russia and its economic loss
Western nations have imposed tough economic sanctions on Russia in response to the military coup in Ukraine. The sanctions aim to paralyze Russia’s economy and punish President Vladimir Putin for his military adventures.
What are economic sanctions?
Economic or diplomatic sanctions are imposed by one country on another to prevent the opponent from possible aggression or violation of international law. These may include air and travel bans and restrictions on the sale of arms. These extreme measures, which are imposed on a country in the form of sanctions, are aimed at forcing a country to change its attitude or policies without the use of military force.
What sanctions are Western countries imposing?
US President Joe Biden has declared that “Russia has taken the path of war.”
- The assets of Russia’s four largest banks will froze and they will restrain from trading in dollars.
- They ban the Emirs close to the Russian presidency.
- The United States and its allies will ban the import of “high-tech” or state-of-the-art equipment from Russia to prevent it from increasing its military capabilities.
What sanctions are imposed by EU member states on Russia during the Russia-Ukraine conflict ?
- Targeting 70% of Russia’s banking market and cutting off business from state-owned companies, including those related to the defense industry.
- Harassment of the energy sector and a ban on the import of equipment and materials used in oil refineries in Russia.
- Stop selling aircraft and equipment to Russian airlines.
- Restricting Russia’s access to raw materials or parts used in high-tech or state-of-the-art equipment, including ‘semiconductors’ and software.
What sanctions are imposed by The United Kingdom on Russia during the Russia-Ukraine conflict ?
- The assets of all major Russian banks will be frozen and they will be expelled from the British financial system.
- Rules will be clarified under which it will not be possible for Russian companies and the government to raise capital from the British market.
- Assets of more individuals and companies will be frozen.
- Russia’s state-owned airline, Air Float, has also been banned in Britain.
- All import licenses under which Russia acquires equipment that can be used in the defense industry as well as in the non-defense industry have been revoked.
- Ban on import of state-of-the-art equipment for oil refineries
- Determining the amount of money that can be deposited in a British bank by Russian citizens.
- German Chancellor Olaf Schulz has also blocked the approval of the Nord Stream Two gas pipeline from Russia to Germany.
- The United States and Britain are also extending financial sanctions on Belarus in exchange for Russia’s support in the invasion of Ukraine.
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What effect will these sanctions have on Russia during the Russia-Ukraine conflict?
- A ban on imports of high-tech equipment, including semiconductor metals and microchips, could affect Russia’s defense and space programs, as well as vehicle production.
- The ban on Russian financial institutions is an attempt to devalue the Russian currency ruble to such an extent that Russia suffers from a financial crisis.
- The Russian government may have to pay a heavy price to protect its banking from being paralyzed. But Russia’s foreign exchange reserves are close to 30 630 billion, enough to deal with such a situation.
- The British government has threatened to impose more sanctions on London’s Russian financial institutions and banks.
- The British government has called for an early passage of the long-awaited ‘Economy Crime Bill’, which would require people to provide proof of where the money came from before transferring it to banks.
What further sanctions could Russia face?
Western nations are considering more sanctions. The options they have included:
- Russia’s expulsion from the Swift system: Swift is a global ‘financial messaging service’ that helps facilitate global capital transfers. It is used by 11,000 financial institutions and 200 countries.
- Ukraine has demanded that Russia be removed from the system immediately.
- Russia could face delays in raising money from oil and gas sales once it is remove from the system.
- When Iran seceded from the system in 2012 under US pressure, Iran’s oil and gas revenues from natural resources were halved, while its foreign trade revenues were reduced by 30 percent.
- But Russia can generate revenue from alternative sources, such as China’s cross-border interbank payment system.
Stopping Russia’s oil and gas exports:
Russia’s economy accounts for 20 percent of oil and gas exports, and half of its total export earnings.
That is why a ban on buying oil and gas from Russia could be very difficult. But the sanctions could also pose a problem for Western nations, as the European Union gets 26 percent of its oil and 38 percent of its gas from Russia. Short-term disruptions to gas supplies could also lead to higher prices in Europe and the UK.
How has Russia reacted to these sanctions?
Russia’s foreign ministry has threatened to enact endorsements on Western nations. This could potentially mess up gas supplies to Europe. Russia banned on British Airlines. Sanctions on Russia’s banking zone will affect companies that do business with Russia or have resources in Russian banks, and exports of high-tech equipment to Russia will hurt Western industries.