War in Ukraine | What other levers against Russia?

Europe and the G7 countries agreed on Saturday to partially exclude Russia from the Swift banking network, which will put more economic pressure on Vladimir Putin’s country. But what else can be done to put pressure on and find a solution to this war?

Vincent Brousseau-Pouliot
The Press

Essential cog in international banking exchanges

After several days of discussions, the countries of Europe and the G7 agreed on Saturday to partially exclude Russia from the Swift system, the main international banking network, used by financial institutions in Europe and North America.

Germany, which buys about 65% of its natural gas from Russia, was hesitant because it fears repercussions on Russian gas and oil supplies. Germany agreed on Saturday to exclude from Swift about 70% of the Russian banking market, i.e. the Russian banks already targeted by European Union sanctions. Canada supports a complete exclusion of Russia from the Swift system.

« Dans l’état actuel des choses, [l’exclusion de Swift] is the best lever, without a shadow of a doubt, if we want economic sanctions to hurt,” says Professor Charles-Philippe David, founder of the Raoul-Dandurand Chair in Strategic and Diplomatic Studies at UQAM.

“I don’t see any rational act that can stop Russia now, but Swift would hurt in the short to medium term. It could encourage Russia to return to the negotiating table,” says expert Ekaterina Piskunova, lecturer in political science at the University of Montreal.

Even banned from the Swift network, Russia could still get paid – especially for its exports – with another system (for example that of China), but it would be more complicated and more expensive. A former Russian finance minister once spoke of a 5% contraction in the Russian economy if Russia is locked out of Swift in the long term. Swift is used by 11,000 financial institutions in 200 countries. Iran was previously excluded from the Swift system in 2012 and 2019.

Stop buying Russian oil and gas?

This would undoubtedly be the most draconian economic sanction. First for Russia, the third largest energy producer in the world. The energy sector represents 15% to 20% of the Russian economy. About 40% of Russian federal government revenue comes from oil and gas.

The problem: it would also affect Europe, which is dependent on it. About 40% of the gas in the countries of the European Union comes from Russia. About 25% of their oil too. “Stopping Russian oil and gas would make a big difference for Russia. But it’s not a credible threat,” says Professor Pierre-Olivier Pineau, holder of the Chair in Energy Sector Management at HEC Montréal.

Another problem, perhaps even more important: banning Russian oil could raise the price of oil per barrel – which would exacerbate inflation, already a problem in the United States, Canada and Europe.

Support (indirectly) Ukrainians militarily

NATO countries – including Canada, the United States, France, Germany and the United Kingdom – have indicated that they will not intervene militarily in Ukraine, which is not part of NATO . This is the right decision, argue experts Jocelyn Coulon (CÉRIUM) and Ekaterina Piskunova. “It’s tragic for Ukraine, but it would mean the outbreak of World War III,” said Mr.^me Piskunova. Charles-Philippe David reminds us, however, that countries like Canada must “do everything they can to help Ukrainians [sur le plan militaire] without directly interfering”, such as providing arms, funding and humanitarian aid.

Strengthen the borders of NATO countries

The Americans will not intervene militarily in Ukraine. But President Joe Biden has also been very clear: if Russia crosses the NATO line (for example in Poland, Latvia, Lithuania or Estonia), the NATO countries and the Americans will intervene militarily. The Biden administration has sent 14,000 additional troops to Europe since the crisis began, including 7,000 soldiers on Thursday on the first day of the Russia-Ukraine war. “You have to be very firm, very united and send very clear messages,” says Professor Charles-Philippe David.

A negotiated solution

It’s hard to imagine a diplomatic solution with Russian tanks in Ukraine. But several experts believe that China, an ally of Russia, holds an important part of the solution to this conflict. “It’s the only country with some leverage over Russia,” says Charles-Philippe David.

Since the start of the war in Ukraine, China has not condemned the Russian invasion, but it nevertheless recalled on Friday that it is necessary to “respect the sovereignty and territorial integrity of all countries”.

“Russia is not isolated on the international scene,” says Jocelyn Coulon, researcher at the Center for International Relations Studies at the University of Montreal and former political adviser to the Trudeau government. “The G7 countries must try to sit the Russians and the Ukrainians at the same table to find a solution,” he said. Unfortunately [pour l’Ukraine], Russia is a great power, and the other powers decided that they would not help, because it would be a world war. »

Imposing stronger economic sanctions – such as Russia’s exclusion from the Swift system announced on Saturday – could, however, put enough pressure on Russia to genuinely negotiate a way out of the crisis, according to several experts.

With Agence France-Presse and the collaboration of Marc Thibodeau, The Press