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Will Sanctions Slow Putin's War In Ukraine?

European Commission President Ursula von der Leyen (center) finishes an EU summit in Brussels about the European Union’s response to Russia’s invasion of Ukraine on February 25.

U.S. and European officials have unveiled a barrage of new financial sanctions against Russia following the Kremlin's invasion of Ukraine, but can the measures affect the fast-moving situation on the ground?

The first wave of sanctions was announced on February 24 following the early morning attack against Ukraine. U.S. President Joe Biden announced restrictions on exports to Russia and sanctions against Russian banks and state-controlled companies.

The European Union announced a similar set of measures and is currently preparing another sanctions package to target Russian businesses, energy, and elites that includes asset freezes on Russian President Vladimir Putin and Foreign Minister Sergei Lavrov.

Both Washington and Brussels, however, chose not to boot Russia off of SWIFT, the dominant system for global financial transactions. Biden played down the need to do so, saying it remains an option but "right now that’s not the position that the rest of Europe wishes to take.” He also suggested the sanctions Washington was imposing would have more bite than a straight ban on SWIFT.

This decision not to exclude Russia from SWIFT has been a source of frustration for Ukrainian officials, including President Volodymyr Zelenskiy, who has called for tougher measures from the West and criticized European leaders who are wary that such a ban would hurt their economies -- most notably their reliance on Russian energy.

To better understand the latest batch of sanctions against Russia and the financial tool kits that U.S. and European officials have at their disposal, RFE/RL spoke with Joerg Forbrig, director for Central and Eastern Europe at the German Marshall Fund, a think tank, in Berlin.

Joerg Forbrig
Joerg Forbrig

RFE/RL: What is your view on the recent sanctions unveiled by the United States and the European Union? Given the circumstances in Ukraine after Russia’s invasion, do you think this is a proportional response from the West?

Joerg Forbrig:
This is obviously a sanctions package from both sides of the Atlantic that has been in preparation for quite some time. This has enabled especially the European Union to respond much quicker than they have in similar situations in the past.

It's quite notable that the EU will have, by the end of this week, passed two sanctions packages. The first two days ago, another one that's being discussed today (February 25). So this is a very swift response.

I would also point out that, from what we know, so far, this is a very coordinated response by both the United States and the European Union. These are clearly sanctions that are in lockstep [and] that are complementary, that cover similar areas of the Russian economy [and] of Russian politics. So this is a very solid transatlantic response.

But at the same time, it's also one that will not likely change events on the ground immediately. These sanctions don't have a deterrent effect anymore. The threat of them has clearly not prevented the Kremlin from launching a war against Ukraine. It is also unlikely that there will be an immediate effect on the events on the ground, but this is nonetheless a very important response because it does impact Russia in the mid- to long-term. It also sends a signal to Ukrainian society that there is Western support.

Civilians take shelter in the Kyiv subway.
Civilians take shelter in the Kyiv subway.

RFE/RL: Noticeably absent from these sanctions is blocking Russia from accessing the SWIFT payment system. Why is SWIFT such a focus of the sanctions debate on Russia and why is it being held back?

First of all, I would say, sanctions are a very complicated beast. They require an awful lot of research, intelligence, [and] information. They have effects not only on the country that you sanction, but also on the countries that roll out the sanctions, [and] typically those effects are not measured in the short-term, but how they unfold in the mid- to long-term. So, this is a very complex policy field.

What you have in these very complicated situations is that very often the public and also individual policymakers zoom in on one specific step. Over the last years in relation to Russia, this was the Nord Stream 2 [natural gas pipeline]. This was a project that captured public attention and became a [main target] for any sanctions. Nord Stream 2 was shelved this week by the German government and now that discussion has switched to SWIFT payments, which has a similar function of simplifying the discussion.

Now, we have seen yesterday (February 24) at the EU summits that the SWIFT [payment system] decision was basically postponed. There were a number of countries, including Germany, but not only, that opposed the exclusion of Russia from the SWIFT system.

The primary reason or argument that has been cited here is that Europe is dependent on Russian energy imports. It is a dependency that has built up for many years and that is very strong, but if you now exclude Russia from the SWIFT system, this basically means that Europeans cannot pay for Russian energy imports any longer. This is one of the primary arguments put forward; whether or not it has merits is a separate story.

Now, in order to protect Europe from the impact of Russia’s exclusion from the SWIFT system, all of that said, policymakers have been at pains to stress that the SWIFT option remains on the table. It is a very strong one. It's sometimes [even] called a nuclear option. This is something that also the German chancellor, for instance, mentioned yesterday, that the SWIFT decision can be reserved for later.

But in the broader context, if you want to follow through with waves of sanctions, then it's obviously always good to have some escalation potential for later on -- and SWIFT being on the table, hopefully credibly, may serve that escalation purpose and it may indeed be introduced at some stage later.

Ukrainian President Volodymyr Zelenskiy, his country under attack, urged the EU to impose tougher sanctions on Russia, after the bloc held off hitting Moscow with the full arsenal of punitive measures.
Ukrainian President Volodymyr Zelenskiy, his country under attack, urged the EU to impose tougher sanctions on Russia, after the bloc held off hitting Moscow with the full arsenal of punitive measures.

RFE/RL: U.S. President Joe Biden said that the sanctions imposed “exceed SWIFT.” Do you agree with that assessment?

It’s a bit hard for me to tell right now.

We know from the announcement of the U.S. sanctions that the two largest lenders in Russia --Sberbank and VTB -- are being sanctioned. They account for a very large part of banking transactions in Russia. So this will certainly have an impact.

At the same time, I suppose that the primary reason for the [United States] not touching SWIFT at the moment is because [Washington] and the EU are trying to be coordinated on sanctions, and the [United States] felt very strongly that [Europe] is not yet in a position to go along with an exclusion of Russia from the SWIFT system.

A Ukrainian soldier crouches next to an anti-tank missile at the scene of a battle on the outskirts of Kharkiv.
A Ukrainian soldier crouches next to an anti-tank missile at the scene of a battle on the outskirts of Kharkiv.

So, in order to preserve political unity, the [United States] didn't go in the direction of a SWIFT exclusion. At the same time, they tried obviously very hard to show that [the] measures that were being rolled out are basically tantamount to an exclusion from the SWIFT system and maybe even more impactful.

U.S. President Joe Biden announces sanctions against Russia during a press conference in Washington on February 24.
U.S. President Joe Biden announces sanctions against Russia during a press conference in Washington on February 24.

RFE/RL: This is obviously a fast-changing situation and, as you mentioned earlier, sanctions take a lot of time for their effect to really actually be felt. So, how effective of a tool are sanctions in terms of changing Russia’s behavior on the ground right now in Ukraine?

I think what we will see is a situation where it gets a lot worse in Ukraine, unfortunately, and for such a situation, having additional response options is very important.

And they're not reduced to SWIFT, either. There's an additional discussion now on a potential no-fly zone over Ukraine in order to prevent some of the worst developments. There's obviously an option to be much broader with personalized sanctions. The EU has rolled out sanctions against 350 individuals earlier this week; other countries have done similar measures. You can go much broader in order to hit the ruling class in Russia.

So, having these options in reserve [and] also preparing them now in order to be able to roll them out as swiftly as the EU has been able, for instance this week, is very important.

This interview has been edited and condensed for clarity.
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    Reid Standish

    Reid Standish is an RFE/RL correspondent in Prague and author of the China In Eurasia briefing. He focuses on Chinese foreign policy in Eastern Europe and Central Asia and has reported extensively about China's Belt and Road Initiative and Beijing’s internment camps in Xinjiang. Prior to joining RFE/RL, Reid was an editor at Foreign Policy magazine and its Moscow correspondent. He has also written for The Atlantic and The Washington Post.