US President Joe Biden warned on Wednesday that he believes Russia is likely to enter Ukraine. Hours earlier, Secretary of State Anthony Blinken told Kiev to be ready for an invasion and to prepare for the difficult days ahead. And weeks of intense talks with Moscow have not yet led to a breakthrough for Washington or Brussels.
Yet the roughly 100,000 Russian troops deployed on the country’s border with Ukraine are not the only reason for growing pessimism in Western capitals, as Europe is on the brink of what could easily escalate into a major military conflict.
Although the United States has threatened strong economic measures against Russia if it engages in new aggression against Ukraine, experts say there is growing recognition that Washington’s ability to influence Moscow’s decisions through sanctions is limited.
Since 2014, the United States has imposed a number of sanctions on Russia to punish its annexation of Crimea and its support for rebel groups waging war in eastern Ukraine. These steps bleed the Russian economy by about $ 50 billion a year, according to a study by the Atlantic Council.
They targeted oligarchs and organizations close to Russian President Vladimir Putin. But so far, they have failed to stop Putin from “continuing to cause problems for Ukraine,” said David Courtwright, director of the Global Policy Initiative at the Step Institute at the University of Notre Dame.
Washington still has many options for additional and tougher economic sanctions it could impose on Moscow – affecting everything from billions of dollars in investments in the Nord Stream 2 gas pipeline to the use of credit cards by ordinary Russians, analysts say.
As Blinken prepares to meet with Russian Foreign Minister Sergei Lavrov in Geneva on Friday, it is unclear to what extent this will affect Putin’s thinking. The boldest measures could also have the opposite effect on Europe, due to the continent’s dependence on Russian energy. And even if the United States continues to impose these new sanctions, it will be some time before the Russian elite begins to feel the bite.
“In the short-term tactical sense, these steps will not affect Putin enough,” Yuval Weber, a research assistant at the Bush School of Management and Public Service at Texas A&M University in Washington, D.C., told Al Jazeera.
“In the long run, sanctions could crush the Russian economy. If Putin invades Ukraine, he will bet on Russia’s future in his actions in the present.
Measurement of pain
So how much could US sanctions hurt Russia?
Researchers at Aalto University in Finland studied the impact of the sanctions between 2014 and 2017 and found that more than 80% of Russian companies in the sample reported adverse effects in their annual reports.
They found that European companies were also affected by the “increased overall business uncertainty caused by early sanctions”, said Yuka Sihvonen, Aalto’s financial accounting assistant. But as Russian companies continue to suffer, complaints from their European counterparts are waning over time, suggesting they have managed to reduce their vulnerability to sanctions, Sihvonen told Al Jazeera.
US sanctions have also had – indeed limited – an effect on Putin’s strategic thinking, said Maria Shagina, a visiting fellow at the US Center for International Relations at the Finnish Institute of International Affairs.
“They played a role in limiting what Russia could do,” she said. In other words, without sanctions, it is quite possible that Putin has not stopped taking over Crimea and the conflict in eastern Ukraine. “The ultimate goal of the sanctions – to reverse what Russia has done in Ukraine – has not been achieved, but there has been some impact,” Shagina said in an interview with Al Jazeera.
But 2021 is not 2014.
So far, sanctions have focused largely on individuals and legal entities believed to be in Putin’s orbit. “This is often most effective in autocratic regimes,” Weber said. However, since 2014, the Kremlin has developed something that represents two parallel economies, he said – one for ordinary Russians who are exposed to sanctions; and the second for the economic, political and military elite, which is protected by them.
Russia has built up $ 630 billion in international reserves. This sweat allows Putin the luxury of ensuring that those in the elite who adhere to him do not personally suffer from new sanctions.
“Essentially, this is a precautionary measure when an invasion occurs,” Weber said. “The elite can treat sanctions simply as the price of doing business – they get a chance to prove their loyalty to Putin.
Energy lever and limitations
The United States has other options, including punishing the Kremlin’s domestic projects and deepening the pain for ordinary Russians in the hope that it will increase public pressure on Putin. Washington has long wanted to destroy the Nord Stream 2 pipeline, which aims to increase Russian natural gas supplies to the European Union.
But while sanctions on the project would hurt participating Russian investors, “a much higher price will be paid by the people of Europe,” Kortwright told Al Jazeera. European consumers are already paying more for gas than usual due to delays in supplies. “Europeans are likely to pay even higher prices if there is an official blockade of the new pipeline,” Kortwright said.
Europe is also hostage to Moscow if the West decides to pursue what Shagina described as a “nuclear option” – to throw Russia out of the international payment system that drives global trade: the World Bank’s Interbank Financial Telecommunications (SWIFT) system. .
This will affect Russian banks and exporters. But it will hurt Europe again, which uses the system to pay billions of dollars to Russia for hydrocarbons each year, Shagina said.
And for the West to really worry Moscow, Europe and the United States need to speak with one voice on sanctions, analysts say. This is important to send a message of unity, Shagina said. It is also vital because the US’s annual trade with Russia (less than $ 30 billion) is part of Europe’s (almost $ 200 billion), which gives Brussels more influence.
This unity was not easy to build. Earlier this week, French President Emmanuel Macron suggested that Europe needs its own dialogue with Russia, despite talks between Washington and Moscow. And on Wednesday, Biden acknowledged that NATO could be divided on how to proceed against Moscow, depending on the extent of Russian intervention in Ukraine.
Courtwright does not see European leaders agreeing to sanctions against Nord Stream 2 or removing Russia from the SWIFT system unless Moscow “actually invades Ukraine or causes a more severe crisis in border or disputed regions,” he said.
The only mitigating factor from the West’s point of view? Russia’s energy lever over Europe also has its limitations. Until now, Moscow has suspended supplies only when it could invoke trade reasons – as a country that does not pay for its gas on time. If the crane is shut down for political reasons such as conflict, Europe will have no alternative but to look for other sources, Weber said.
Some countries are already preparing for this opportunity. Earlier this month, Saudi oil giant Aramco bought a stake in a Polish refinery, a move that experts say shows Warsaw’s desire to reduce its dependence on Russian energy. If others follow suit, Moscow risks losing a vital source of revenue in the long run.
“Russia knows that,” Weber said. “You can only play with the energy weapon once.”