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Ukraine called on Monday for immediate sanctions from Europe on Russia to act as a deterrent as tensions on the border push higher, but Western states maintain that a punishing package of measures will only roll out if the Kremlin pushes ahead with an attack.
"We expect decisions," Ukraine's Foreign Minister Dmytro Kuleba said in Brussels before addressing EU foreign ministers. "We believe that there are good and legitimate reasons to impose at least some of the sanctions now to demonstrate that the European Union is not only talking the talk about sanctions, but is also walking the walk."
Josep Borrell, the EU foreign policy chief, said "the work is done" on the sanctions Russia faces while French Finance Minister Bruno Le Maire said the European Union was prepared to bear a significant cost to punish aggression. “We are aware of the consequences for the EU economy,” Le Maire said on Monday. “But the political principle is more important: we refuse any kind of attack against Ukraine’s sovereignty.”
The EU ministers backed plans announced last month for a 1.2 billion euro financial aid loan package for Ukraine, and also agreed in principle to a long-standing Ukrainian request for a small-scale mission of military instructors to help train officers.
Boris Johnson vowed on Sunday that Moscow would be “hit very hard” by any land grab and President Joe Biden has promised President Vladimir Putin that he will have “never seen sanctions like the ones I promise will be imposed”.
The main aim will be to cut Russia off from the global financial system and go after money its oligarchs have squirrelled away in the West.
Of all the countries threatening economic retaliation, Britain has the ability to inflict most pain with more Russian gold in London that anywhere else, spread across both the stock exchange as well as its affluent mansions.
Liz Truss, the Foreign Secretary, has promised to target anyone “providing strategic support” to Mr Putin’s regime, which carries weight because London is a vital capital-raising centre for oligarchs.
The London Stock Exchange is home to secondary listings for cash-raising to 31 Russian companies including Gazprom and Rosneft, as well as state banks and mining groups, with a total listing of £486 billion ($661.92bn).
In 2020 these entities paid the Russian state £39bn in tax, providing crucial government revenue, especially for the military which has an annual budget of about £41bn.
Parliament has now been given the power to impose sanctions on companies conducting business of “economic significance to the government of Russia”.
Britain also plans to vastly increase the number of pro-Putin Russians that are penalised from the 180 people and 48 entities sanctioned since the 2014 annexation of Crimea.
In the toughest scenario, companies in Britain, the European Union or US could be prevented from making transactions with any sanctioned Russian entity, essentially leading to a suspension of their shares.
Another dramatic move would be for the West to follow Mr Biden’s threat of excluding Russian banks from the international Swift system that is used to make billions of dollars in cross-border transfers.
The US has promised retribution on a Ukraine offensive. “The mother of all sanctions” has been threatened by Bob Menendez, chairman of the Senate’s foreign relations committee.
America has a sanctions bill that would hit at least 12 Russian banks as well as oil, gas and mining companies.
If the bill becomes law, unprecedented sanctions could lead to the swift designation of a wide range of people and entities.
But it is in the technology sector that the US could inflict the most pain by blocking exports of key components, particularly those that would affect the defence sector, as well as parts used in phones and appliances, causing widespread difficulties for Russia’s consumers.
While the US and UK appear to have tough penalties in place, the EU’s reliance on Russian energy could undermine a united front, particularly with Germany reluctant to ban the Nord Stream 2 gas pipeline.
Ursula von der Leyen, the EU Commission chief, on Saturday warned Moscow that its financial and energy sectors would be targeted despite Russia providing 40 per cent of Europe’s gas requirements.
“There's a big financial packet of sanctions that would cut off Russia from the financial markets,” she told CNBC. “A heavy blow for the economy and the export controls.”
She said that while gas exports to Europe “provided half of the Russian budget”, the EU was already looking towards others suppliers including the US.
A united and broad range of sanctions could certainly hurt Russia and cause significant long-term damage, as Europe now understands it has to wean itself off Moscow’s hydrocarbon dependency.
But for them to prove more effective than those imposed on Iran, the West must be ready to suffer its own economic pain. That will be a stiff examination of unity in the face of aggression.
