It’s escalation. Faced with military attacks from Russia, the international coalition is tightening up to come to the aid of Ukraine, without however sending soldiers. Westerners are targeting the Russian purse by piling up sanctions against Vladimir Putin, his relatives and Russian business circles. Kiev’s allies decided to disconnect several Russian banks from the Swift messaging system on Saturday evening. Despite this new hardening, Russia continued its offensive on Sunday February 27.
>> Follow the evolution of the war in Ukraine in our live
1What are the latest sanctions taken?
The European Commission and several countries including the United States, announced on Saturday evening the exclusion of various Russian banks of the Swift interbank platform, “the financial nuclear weapon”, according to the Minister of the Economy, Bruno Le Maire. “All Russian banks already sanctioned by the international community” are concerned, and “if necessary, other institutes“, said the spokesperson for the German government, whose country currently chairs the G7 forum.
This banking messaging network, managed by a private company based in Belgium, allows payments to be received or sent anywhere in the world. Germany, initially reluctant because of its great dependence on Russian gas, finally accepted.
>> Three questions about the Swift system, presented as the lethal weapon against Russia
The EU has also announced that it wants “paralyze” the assets of the Russian Central Bank, to prevent Moscow from circumventing the sanctions. Western allies have therefore decided to further restrict the access of the Russian central bank to the capital markets, in order to make more difficult its attempts to support the price of the rouble, which is in decline following the war in Ukraine.
2What other sanctions have been decided?
The other measures are also mainly financial and commercial. Sanctions even directly concern Vladimir Putin and his Minister of Foreign Affairs, Sergei Lavrov. Neither has the right to set foot in the United States and the two leaders have been added to the very long EU blacklist, which has frozen the assets of the 450 deputies of the Duma, the lower house of the Russian Parliament and 26 personalities from the business world.
Brussels will also reduce Russia’s access to “crucial technologies”, depriving it of electronic components and software. It will be prohibited to export products and technologies of the aeronautical, space and oil industry to Russia. Several Russian state companies will have their access to European funding blocked. The United States will also cut more than half of Russia’s technology imports. Thirteen companies, including energy giant Gazprom, will no longer be able to raise money on Western financial markets.
The United States will also sanction the “Russian Direct Investment Fund”, a sovereign fund of Russia intended to attract investments in the Russian economy. Four Russian banks, including the two largest in the country, Sberbank and VTB Bank, are sanctioned: VTB Bank has already announced that the use of its Visa and Mastercard type bank cards abroad is now “impossible”.
Finally, the airspace of Europe is gradually closing to Russian planes. From Germany to Sweden, via Belgium and Italy… It is a question of preventing Russian aircraft from using airports and crossing territories. An invisible wall thus forces flights to the west to make large detours and nails dozens of planes to the ground.
3What is the asset freeze?
The freezing of the assets of Vladimir Putin, whose fortune is estimated at several billion euros, will result in the blocking of his bank accounts and other financial assets, as specified on the website of the European Data Protection Supervisor.
The Russian president can no longer carry out any banking operation in the European Union: transfer money, sell property, securities or shares, or touch a savings plan, details The Parisian (article reserved for subscribers).
“Freezing the assets of a foreign leader is often a very symbolic measure, the direct impact is relatively low,” however, tempers Christopher Dembik, economist at Saxo Bank, interviewed from France 2. “In general, this type of leader has already planned for his holdings to be in areas that are not directly affected.”
4Are these penalties unprecedented?
No, according to David Teurtrie, specialist in Russia, even if the international community has communicated on measures “massive and unprecedented”. Since the beginning of the Ukrainian crisis in 2014, “Westerns regularly issue sanctions against Russia”, recalls the specialist. Personalities sanctioned, suspension of military cooperation by France and Germany, disconnection of Visa or Mastercard bank cards from the Russian bank Rossia… In 2017, the United States even said to maintain sanctions against Russia as long as Crimea would be annexed , without succeeding in intimidating Vladimir Putin.
As for the partial exclusion of Swift, it has already been used for other countries than Russia, in particular against Iran between 2012 and 2015. The country had then lost almost half of its oil revenues and 30% of its foreign trade, recalls the Carnegie Moscow Center*.
“The only leaders in the world sanctioned by the EU are the Syrian President, Bashar Al-Assad, and the President of Belarus, Alexander Lukashenko, and therefore now Putin for Russia”however, recalls the head of European diplomacy, Josep Borrell.
5Are these measures effective?
Dince Tuesday, the strings of international sanctions have not deterred Vladimir Putin from invading Ukraine. The Russian Ministry of Defense even ordered its army on Saturday to“widening the offensive”.
The majority of sanctions did not “immediate effects”explains Olivier Dorgans, lawyer specializing in economic sanctions, on France 2. “We will wait a few weeks before seeing the first effects on the Russian economy.” Alexei Kudrin, Russia’s former finance minister, estimates Swift’s exclusion could shrink the economy by 5%, reports the British media BBC*.
A glance at the past confirms that this economic weapon is not necessarily effective. Only 22% of countries that have suffered sanctions of this order in recent years have changed their policy, according to the Swiss institute Targeted Sanctions Consortium. Russia, targeted by measures for eight years, has not backed down an inch since the start of the Crimean crisis in 2014, underlines the New York Times*.
She is even better prepared today. According to specialist David Teurtrie, Russia has strengthened its economic and financial resilience since this period. Moscow has accumulated and diversified the equivalent of more than 600 billion dollars and launched its own bank card. The effect should therefore be felt more on its foreign than domestic trade.
Russia also anticipated the exclusion of the international Swift system, and created its own independent messaging system. This alternative is used in Russia and in about twenty countries. Thereby, “contrary to Swift’s exclusion sanctions” past, “with Iraq or Iran”these will have a “lower impact” on the Russian economy, tempers Estelle Brack, expert in banking and financial matters, interviewed by franceinfo on Saturday.
6What could be the consequences for Europe?
The Russian military operation in Ukraine very quickly increased tension on the commodity market. But if prices rise, the shortage is not on the agenda, according to the French government. “We have little exposure to the Russian market, it’s 1 to 2% of French exports and imports. (…) The Russian market is not a strategic market for France”assured the Minister of the Economy, Bruno Le Maire, on Wednesday on BFMTV.
>> Gas, wheat, oil… What are the possible economic consequences for the French?
The most violent backlash will be linked to the exclusion of Russian banks from Swift. As recalled by national treasury departmentFrance is the second largest foreign investor in Russia and the largest foreign employer, with 160,000 employees of French companies (Societe Generale, Renault, TotalEnergie and Decathlon). “If Russia is disconnected, we will not receive foreign payment, but our buyers, primarily European countries, would not receive our goods: oil, gas, metals and other imported products”warned a Russian senator in an interview with the TASS* agency.
The consequences of the other sanctions should, on the other hand, be more limited, and that was the whole objective according to Stephen Le Vesconte, lawyer for the firm Linklaters, who sees in it the fruit “a compromise to hurt without shooting yourself in the foot”.
Several European banks certainly have subsidiaries in Russia. The most exposed are Société Générale, Italy’s Unicredit and Austria’s Raiffeisen Bank International. But the first two ensured that their activities represented only a small percentage on the scale of the group. They “will operate in a country where the currency will fall in value, where inflation is likely to increase drastically”says Stephen Le Vesconte.
7 Why not intervene on the military ground?
From “defense equipment” will be delivered to the Ukrainian authorities, “as well as fuel support”, announced the presidency after a defense council meeting on Saturday at the Elysée around President Emmanuel Macron. French military reinforcements in Estonia and within the framework of NATO in Romania have been announced. “These military devices are not intended for any escalation, but simply to participate in the defense of NATO member countries”subsequently justified the Ministry of the Armed Forces.
>> Which countries decided to send military aid to Kiev in the face of the Russian army?
But there is no question for the moment of sending European troops to Ukraine, confirmed Jean-Yves Le Drian, Minister of Foreign Affairs to France Inter on Friday. Ukraine, which is not a member of NATO, is not concerned by the security agreement which provides that “if a country of the alliance is attacked, all the countries feel concerned and it is as if all the countries were attacked”. However, this agreement contains a “duty of support for partner countries”, like Ukraine, “to whom we are providing significant assistance, including military equipment”, insisted the minister.
Intervening directly in Ukraine would risk triggering a much larger conflict, which would reach the French borders. However, France would not have the human, technological or financial means to sustain a high-intensity war like the one that Ukraine is going through, according to a parliamentary report of February 17, reported by The echoes (paid item).
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* Links followed by an asterisk lead to articles in English.