Russian President Vladimir Putin gestures as he attends his annual year-end news conference in Moscow, Russia, December 23, 2021.
Evgenia Novozhenina | Reuters
The US has sent the clearest message that Russia, its key economic sectors as well as its leadership Vladimir Putincould face the harshest sanctions it has ever faced if it invades Ukraine.
On Tuesday, US President Joe Biden intimated that his Russian counterpart could face personal sanctions if Moscow gives its military the green light to invade.
Russia has about 100,000 troops and military hardware stationed at various points along its border with Ukraine and there are concerns that it is planning an invasion of the neighboring country, although Moscow has repeatedly denied that it is doing so. plan to do so.
Western allies won’t stand a chance with NATO putting its forces on standby and bolstering its position in Eastern Europe with more ships and warplanes. The US has put thousands of troops on high alert, meaning they are ready to deploy to the region if the crisis escalates.
The US, UK and EU have said that Russia will be subject to new sanctions on individuals and key sectors of the economy if it invades Ukraine. Russia has seen sectors such as energy, finance and defense the target of previous rounds of sanctions because of its 2014 annexation of Crimea from Ukraine.
But the United States gave its clearest signal on Tuesday that it will seek to cripple Russia’s economy – which could lead to enormous pressure on Putin, both the Russian people and business leaders. industry – if Moscow invades the neighboring country again.
On Tuesday, Mr. Biden said he felt an obligation to strengthen NATO’s defenses in Poland and Romania, in Eastern Europe, and when asked if he could see himself imposing sanctions. fines against the Russian president or not, he replied: “Yes, I will see that.”
Britain signaled it could do the same with Foreign Secretary Liz Truss saying, “we don’t rule out anything” when asked if Putin could be sanctioned, Reuters reported on Wednesday. .
The threat of personal sanctions against Putin would be a big step up from previous measures against the Russian state and could lead the West to target Putin’s wealth and prevent his travel. him, although no further details were released.
Senior White House officials told reporters on a call regarding economic deterrence measures being considered against Russia that “we are prepared to implement sanctions with enormous consequences not yet taken into account in 2014” when Russia annexed Crimea.
Measures they are considering range from more financial sanctions to the use of “new export controls” that could block Russia’s access to US-made technological components. , similar to those used against Chinese tech giant Huawei.
“The pastism is slowly disappearing, and this time we will start at the top of the ladder and stay there. We have made an effort to signal this intent very clearly,” said a senior official. of the White House said on the call. Tuesday.
Officials say the United States is also ready to impose export controls that would essentially prevent Russia from obtaining US-origin software and technology to harm key economic sectors. of Russia. They say these could hurt Putin’s “strategic ambitions to industrialize his economy”.
They note that such controls “would affect areas important to him, whether that be in artificial intelligence or quantum computing, defense, aerospace or other important areas.”
It’s not an exhaustive list with “all options” on the table, the official added, saying “we are in agreement with the Allies and partners to unequivocally impose severe consequences.” important to Russia if it continues to invade Ukraine.”
When asked if export controls could impact global supply chains, one official said there would be minimal impact “because we are talking about denying supply to Russia.” downstream products that are crucial to the country’s ambitions to develop high-tech capabilities in the aerospace and defense sectors. , lasers and sensors, marine, AI, robotics, quantum, etc.”
“And in each of these supply chains, we and/or our allies and partners design and manufacture the technology. And export controls deny Russia a complex input that it doesn’t. can be replaced through domestic production or alternative sources of supply.”
Such sectors are purportedly considered, the official noted, to be those that “Putin himself has seen as the way forward for Russia to diversify its economy beyond oil and gas” – another area where the US has could seek to wreak havoc if Russia weaponizes its energy supply.
Europe’s energy sector has become a battleground for Russia and the US in recent years, and the issue has become increasingly prominent as tensions rise over Ukraine.
Russia supplies the EU with about 40% of its natural gas supply and has built a large Nord Stream 2 gas pipeline, so it can send gas supplies directly to Germany, bypassing Ukraine. The United States, which wants to increase its exports of liquefied natural gas to Europe, has condemned the project as damaging Europe’s energy security.
In fact, the Biden administration has been looking for ways to secure energy for its European allies in the event that Moscow decides to cut off energy supplies to the region in an attempt to secure concessions to the European Union. Ukraine.
A senior administration official, who declined to be named to share details of ongoing plans, told CNBC on Tuesday that the administration is working with major liquefied natural gas buyers and suppliers to ensure supply is diverted to Europe if necessary.
Some analysts have pointed out that the latest signals coming from the US about potential sanctions against Russia are the strongest they have ever seen.
“I have been monitoring US sanctions on Russia since 2014 and what we are seeing below is a huge step forward,” said Timothy Ash, senior strategist for Sovereignty in New Markets. float at Bluebay Asset Management, said Tuesday night in a research note.
“American officials are saying to Putin ‘go ahead, you go into Ukraine, we’ll punish you to hell, and try to retaliate by cutting off energy supplies to Europe. We’re planning it. Plan for that – we’re going to put Europe through the winter and you’re going to be the loser in the end.’ He noted that the US is trying to help Europe break its energy dependence on Russia.
Close followers of Russian politics believe that the current rise in tensions over Ukraine reflects Moscow’s (and more specifically Putin’s) efforts to reverse the expansion of Western influence in Russia’s backyard. and former territories, since the end of the Cold War and the collapse of the Soviet Union in 1991.
Sanctions remain one of the few options open to the West because the West does not want to engage in a military conflict with Russia. Ukraine is not a member of NATO and therefore the military alliance is not obligated to defend the bloc.
But Western allies want to prevent Russia from controlling and coercing (and invading) its neighbors. Meanwhile, Russia wants legal guarantees that Ukraine will never be able to join NATO and that the alliance’s deployment in Eastern Europe will be pushed back. The US and NATO have rejected those requests.
“Western allies have limited concessions” when it comes to Russia, according to Andrius Tursa, Central and Eastern Europe adviser at Teneo Intelligence.
“They risk undermining the credibility of the US and NATO security guarantees, which are the backbone of the post-Cold War security architecture in Europe. Ultimately, the collapse of the order. Post-Cold War self-security seems to be one of the things of the Kremlin. The main goals,” he noted on Tuesday.
“Even if the current crisis is resolved through diplomacy, relations between Russia and the West appear to have reached a more hostile and unpredictable stage. Is there any meaningful change in roles? Russia’s political leadership.”
Markets have been buoyant this week as concerns about Ukraine have dominated global headlines and there is little certainty about what Putin will do next.
On Tuesday, Holger Schmieding, chief economist at Berenberg Bank, noted that “the increased risk that he could invade Ukraine is already starting to affect the market … this is not the case. However, it’s one of those tail risks that we need to ponder. Like other observers, we don’t know what Putin is up to and what might happen next.”
Schmieding says that Putin has won a number of home victories in the wake of the Ukraine crisis, with higher oil and gas prices a boon for the Russian energy exporter.
“Faced with concerns about falling living standards at home, Putin is now reaping the profits from rising oil and natural gas prices,” Schmieding noted, adding that “with his sword, he He’s achieved something. The world is talking. He. America and Russia are discussing the fate of Europe, sometimes even without Europe itself at the table.”
“Putin can present this to his domestic audience as a throwback to the Cold War era when the US and the Soviet Union were the two most important global players.”