For months now, West Russia and the United States leaders have been engaged in a war of words. The political shadow boxing has been over a possible Russian invasion into Ukraine.
The west has described unprecedented economic penalties and sanctions with massive consequences if Russia invades Ukraine. Is Moscow prepared for these penalties? Let’s understand if these sanctions could have an impact on Russia.
Why Will the Sanctions Be Imposed? What Will Be the Result of These Measures Taken by the USA?
This Monday, the White House released a statement in which they revealed their agenda of imposing sanctions on The Russian Government. As per the statement, they mentioned that they had identified the allies and members of the “Inner Circle”.
The Allies and the people having a connection with the Inner circle will soon have to face the sanctions that the U.S. government is going to impose soon. Although, the officials have not yet revealed the names of the Russian family members whom they suspect to be part of this scenario. But the U.S. govt.
Will be excluding them from entertaining themselves with the united states’ properties like universities etc., as they will be weakening the family members regarding the money.
When U.S. President Joe Biden raised the possibility of targeting Russian President Vladimir Putin with sanctions, he did not specify what shape the penalties could take.
But America’s past measures against authoritarian strongmen like former Libyan leader Muammar Gaddafi and Syrian President Bashar al-Assad include freezing personal assets abroad and banning foreign banks transactions.
In its response to the west’s threats, the Kremlin says that the move would be pointless since Russian officials are banned from holding wealth a blow abroad, and not any penalty would only damage diplomacy on the Ukraine conflict.
Now the question is, What could be more damaging? In the power corridors of Brussels, it was being discussed for many days that banning Russian banks transactions in dollars (which is the key currency on the international market) and the possibility of excluding Moscow from the swift (a key mechanism of international banking exchanges) will be damaging a lot.
We have also seen such incidents In the past, like when Iran has suffered from having been excluded from the swift, and in the case of Russia, its crucial oil and gas sector could be badly hit.
Another potential target of the sanctions could be the controversial Nord stream. Two pipelines that connect Russia with Germany, the construction of the pipeline is complete, and it is set to double natural gas supplies to Europe. Also on nato’s table is the possibility of burning exports of crucial technologies to Russia.
How Is Russia Going to Tackle the Situation?
In 2014 Russia tackled waves of western sanctions after it annexed the Crimean peninsula from
Ukraine. The sanctions hit the rubble and saw foreign investments dwindle, and in response, Moscow built up fortress Russia measures. It was designed to ensure new sanctions will not see the economy of Russia’s financial system collapse.
To Russia’s advantage, the country has a small external debt compared to other global powers and a large reserve of foreign currency accumulated by the central bank. Moscow has also pursued a de-dollarization policy for several years.
It has also called on its partners, China and India, to conduct payments in other currencies. Last year, Russia even said it would be dropping dollars from its national wealth fund. Russia even launched its own payment system named MRI in order to minimize the risk of being cut off from the west-controlled financial bodies.