By: Sid Spahn
New sanctions have been imposed by members of NATO (North Atlantic Treaty Organization) along with Japan and Australia against Russia for ordering troops into eastern regions of Ukraine.
But, what is a sanction, and what specific sanctions are being imposed?
Sanctions are usually some type of action taken by one nation to coerce another to follow international agreements. Usually, these take the form of restrictions in trade, or participation in official sporting events like the Olympics.
Some members of NATO along with Japan and Australia are imposing sanctions against Russia to implore them to remove their troops from the Ukraine and refrain from attacking other bordering countries.
The sanctions now being imposed mostly target Russia’s financial institutions and their governments ability to access finances in the west. This includes cutting off access to money in America, other NATO countries, as well as Japan, New Zealand, and North Korea. The White House’s own press secretary Jen Psaki said herself “No financial institution is safe.”
Not only this, but the White House’s “FACT SHEET” stated that there will be specific sanctions against Russia’s largest and second largest banks. These banks are systemically critical to the Russian economy, with their largest bank, Sberbank, and its subsidiaries holding one third of Russian banking sector assets.
Their second largest bank, VTB and its 20 subsidiaries have also been sanctioned to fully block any assets touching the U.S. financial system, along with similar blocks to Bank Otkritie, Sovcombank OJSC, Novikombank and 34 subsidiaries. Debt and equity restrictions have been placed on 13 different Russian enterprises and entities. These restrictions are on transactions in, financing for, and any other dealings in debt older than 14 days. These government-owned enterprises and entities are currently holding an estimated $14 trillion: a huge asset to the Russian economy.
Full blocking sanctions were also placed on specific Russian elites and their families, freezing any assets they may hold in the United States. Sanctions have also been placed on Belarian individuals and entities including the Belarian military and many of their banks for supporting the invasion of Ukraine.
Restrictions have also been placed on the export of all U.S. material and any items produced in foreign countries using U.S. technology, software, or equipment to the Russian Ministry of Defense, including Armed Forces of Russia, regardless of where they may be located.
These assets are heavily connected to the global financial system and Russia’s ability to diversify its economy; this connection is being severed with “multilateral cooperation”, in which there are specific mentions of Australia, Canada, the European Union, Japan, and the United Kingdom.
President Biden has also sanctioned the company building Russia’s Nord Stream 2 pipeline; a pipeline spanning 1,230 kilometers that would double the capacity of the Nord Stream pipeline to 110 billion cubic meters of gas per year.
This decision was made in coordination with Germany, whom Biden stated has been “a leader in that effort”. On February 22, 2022, Germany officially halted any certification of the pipeline.
How do these sanctions affect Russia?
First, the Nord Stream 2 pipeline was an essential project that would give an alternative to the current pipelines in Ukraine and Belarus. Not only are these older pipelines in need of repairs, but using a newer pipeline would lower costs by no longer having Ukrainian transit fees.
This new pipeline is a project from the Russian company Gazprom and Europe is a huge market for gas right now, as they are in a transition from coal and nuclear plants to renewable energy sources. As Gazprom is a mostly state-owned company, their profits greatly benefit the Russian government’s finances and budget. So, clearly, losing out on pre planned income will be anything but beneficial for the Russian government and military budget.
Sberbank, VTB Bank, Bank Otkritie, Sovcombank OJSC, Novikombank, all their subsequent subsidiaries as well as the assets of Russian elites being frozen will cut off Russia’s connection to the global market and economy and undercut any plans for diversifying their own economy.
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