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What impact could more Western sanctions on Russia have?

Putin's Russia could face greater trade penalties if it invades Ukraine.

By Michael Goodier

Joe Biden met Vladimir Putin in a video conference on Tuesday afternoon (7 December) as tensions remain high around Russia’s military mobilisation on the Ukrainian border. Biden has been consulting European allies on a joint response. 

Russia has moved thousands of troops to its border with Ukraine in recent weeks. US intelligence estimates put the current number at 70,000 and reports that this could reach 175,000 as early as January (the Ukrainian government puts the current figure at 90,000). Ukraine says tanks, artillery and other military units have been deployed to Crimea (illegally annexed by Russia in 2014) and the Donbas region, which is inside Ukrainian state borders but held by Russian-backed separatists. The US president is expected to threaten Putin with further economic sanctions if Russia invades Ukraine. 

Economic sanctions have been imposed by the US, the EU and other nations since 2014 against Russian individuals and businesses, in response to the Russian invasion of Crimea. These were tightened as the conflict escalated into war in Donbas.

What impact have the current sanctions had?

The current sanctions – which are limited to certain individuals and businesses – have not been enough to stop Russia mobilising troops, let alone fulfil the international agreements to end the war in Donbas. Though limited, they have had some effects on Russia’s economy.

The Russian rouble collapsed following the third round of sanctions in 2014, though the falling price of crude oil, one of Russia’s main commodity exports, also contributed.

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[See also: America's toolbox for Russia is empty]

What could the impact of new sanctions be?

Much trade with Russia doesn’t come under current sanction regimes: countries that have imposed sanctions still account for around half of Russia’s imports and exports. 

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European nations have closer economic ties with Russia than the US, so are more likely to feel the effects of broad sanctions. Russia accounts for less than one per cent of US trade according to UN data, while for the EU the figure is 4.8 per cent.

[See also: Why Biden has been forced to accept Russia and Germany's energy relationship]

When it comes to overall trade, Russia needs Europe more than Europe needs Russia: the EU is Russia’s largest trade partner, accounting for 37.3 per cent of its trade.

CNN reports that as well as further moves against members of Putin's inner circle, new sanctions could include actions against Russian energy producers, which would have a large impact in Europe.

The Nord Stream 2 gas pipeline from Russia to Europe has been completed, but is yet to be certified by the German energy regulator. If Russia were to invade Ukraine, it could be shelved completely.

Even without the pipeline, Russia is still the source of 26 per cent of the EU’s oil imports and 40 per cent of its gas imports. If sanctions were to be imposed on Russian gas, a big beneficiary could be the US. The volume of liquefied natural gas (LNG) imported from the US has increased over the past decade, and the US is the fifth largest exporter of all natural gas by weight to the EU28 (EU plus the UK), exporting 8 per cent of total natural gas last year. 

One other area reportedly being considered is disconnecting Russia from the Swift international payment system, which is based in Belgium. This system is used by banks around the world; removing access was one of the most crippling measures used against Iran.

The US secretary of state Antony Blinken has said that if Russia invades, actions will include “high-impact economic measures that we’ve refrained from taking in the past”. Ukraine will be hoping that these have more of an impact than the current sanctions regime.

[See also: Is Vladimir Putin preparing for war?]