Sanctions have been the main weapon of the European Union against Russia in this month of war. The Twenty-seven have approved four packages of measures –and are preparing a fifth–, with measures such as freezing the assets of the oligarchs or blocking the Russian Central Bank. Their goal is to limit the Kremlin’s ability to finance the invasion, try to stop it, or at least deter it from taking further military action in the future.
What effect do these sanctions have on Russia and its economy? And what cost do they carry?
We have consulted a panel of ten experts on the effect of the measures on the Russian economy and the possible repercussions in the EU. Each expert has assessed the severity of 16 sanctions (from one to 10, with one being the least severe and 10 being the most severe). They include 13 sanctions already approved by the Member States and another three that are considered possible. In the following graphs we detail the average of the scores for each one.
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Experts believe that the sanctions against Russian finances are the most severe for its economy, without entailing great efforts for Europe. Other measures with greater visibility would be having less economic impact: this is the case of sanctions against Russian propaganda or against its oligarchs. The latter impose a cost on people close to the regime, and this may have an effect on future decisions of the Kremlin, but not so much economic consequences.
Below we explain the sanctions with the most impact on the Russian economy according to the experts consulted.
Block the reserves of the Russian Central Bank
It is the measure with the best balance between high impact on Russia and low cost for the Union. Experts assign an impact of 8.1 and a cost of 3.7. It is an unprecedented move: on February 28, Russia’s access to its foreign exchange reserves, which are essential to ensure the stability of the ruble and are the last resort of Russian banks and corporations, was closed. as pointed Michael S. Bernstam of Stanford University in the Financial Times: “The Russian Central Bank and the Russians lost access to 60% of their foreign exchange reserves.”
According to Ilke Toygür, from the German Institute for International and Security Affairs and Carlos III in Madrid, these sanctions are the most effective: “On a day-to-day basis, economic transactions become more difficult and reserves lose guarantees for stability of the banking system”.
Against financial services
This group includes sanctions such as the disconnection of seven Russian banks from the international transfer system (SWIFT) or the prohibition of investing in entities from that country. For the experts, they would have had a great impact in Russia (7.5), with a bearable cost for the EU (4.5). “It has caused a lot of distrust towards Russian banks,” says Santiago Carbó, Professor of Economics at the University of Granada. These measures have forced Russia to react: “The obligation to pay for gas in rubles is a clear indicator that you have created a problem.”
Against the transportation and aerospace industry
Its impact in Russia is also high (7) and the cost to Europe is low (4). The sanctions have hit Russian air and sea transport, key to its imports and connectivity. The measures, which ban the sale of aircraft, spare parts and equipment to Russian airlines, could render three-quarters of its commercial fleet, built in the EU, US and Canada, unflyable, according to the Council of Europe. The experts consulted point out that parts of certain aircraft are already missing. In addition, the Twenty-seven have closed the airspace to Russian aircraft, both commercial and private.
The most severe sanctions, yet to be approved
A measure not yet approved but highly debated is the ban on imports of Russian oil, gas and coal. If approved, experts say that these sanctions will be another torpedo against the Russian economy. But they would also have a very high cost for the EU.
The main difficulty in cutting off the purchase of Russian gas is the heavy dependence of some EU countries, which import 38% of their gas from Russia. Germany, which obtains 65% of what it consumes from there, is one of the members that has shown the most reluctance, along with Hungary (95%) and Italy (43%). Cutting off these flows could mark a before and after: “If we continue to buy Russian gas, the measures may not have the scope that was expected,” Carbó points out. “As long as we keep buying it, we keep financing Russia. There will be a shortage of cartridges as long as this dependency is not reduced, ”he adds.
A blockade of Russian crude would be the measure with the most impact of the 16 valued (8.3), but experts also judge it to be among the most damaging for the European Union.
Brussels has proposed this week to ban the import of Russian coal. According to the experts consulted, it is a painful measure for Russia and less so for the Union, which is not as dependent on this mineral as it is on oil or gas. For the measure to go ahead, however, all states have to approve it.
To write this article, EL PAÍS has assembled a panel of ten experts (the order does not coincide with the numbering of the graphs):
- Natasha Kuhrt. Lecturer in the Department of War Studies at King’s College
- Santiago Carbo. Director of the Financial Area and Digitization of Funcas
- Ilke Toygur. Researcher at the German Center for International and Security Studies
- Angel Saz. Director of the Center for the Global Economy and Geopolitics at ESADE
- Nicholas Mulder. Professor in the Department of History at Cornell University
- Rym Ayadi. Member of the Center for Banking Research at the University of London
- Tom Keating. Director of the Center for the study of Financial Crime and Security of the Royal United Services Institute (RUSI)
- Viljar Veebel. Department of Political and Strategic Studies of the Baltic Defense College
- Sergei Guriev. Professor at the Institute of Political Studies in Paris
- Frederick Steinberg. Principal investigator of the Elcano Royal Institute
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