Although the West has not sent troops to the front lines, it has entered the war using extensive economic artillery against the government of Vladimir Putin.
The European Union, the United States, the United Kingdom and their allies this week banned transactions in US dollars with the Russian Central Bank in retaliation for the invasion of Ukraine.
Other sanctions were added to the measure, such as the exclusion of some Russian banks from the SWIFT international payment system , which allows the direct transfer of money across borders, with the aim of isolating Moscow from the international financial system.
The British government, for its part, said it will freeze the assets of major Russian banks and exclude them from the UK financial system, while the European Union announced sanctions targeting 70% of the Russian banking market and key state-owned companies such as those of defending.
Western powers have also imposed sanctions on some Russian millionaires and on Putin himself, whose known assets abroad will be frozen.
The private sector is bowing to the restrictions. The Visa and Mastercard firms, for example, announced the blocking of some Russian banks from their payment systems.
In parallel, there has been an exodus of private companies operating in Russia, including firms such as BP, Shell or Equinor.
At BBC Mundo we spoke with Julia Friedlander , senior researcher and director of the Economic Statism Initiative of the Center for Geoeconomics of the Atlantic Council, in the United States, to address the scope of the financial measures against the government of Vladimir Putin.
Friedlander was Senior Policy Advisor for Europe at the US Treasury Department’s Office of Terrorism and Financial Intelligence and served as a Macroeconomist at the Treasury Department’s Europe Office.
Until 2019, he worked at the White House National Security Council on security and economic relations issues. He was previously an analyst for the Central Intelligence Agency, CIA .
What has been the real impact of the sanctions imposed by the West on Moscow?
We are trying to understand it because things are changing every moment, in real time.
The Russians raised their interest rate 20% trying to avoid a collapse of their currency, but they did not succeed.
On the other hand, the Central Bank of Russia has reserves in the country that have allowed it to avoid an economic collapse after the sanctions, but the restrictions imposed are harsh.
But to what extent can the sanctions imposed so far have a determining effect? There are analysts who insist on the idea that they are not enough to frustrate Vladimir Putin’s military campaign in Ukraine…
It’s going to take a little while before the Russians exhaust whatever resources they have to sustain their economy. The Russians still have a financial lifeline with their local reserves, but they could run out pretty quickly.
The scene is changing. Financial sanctions may cause the Russian economy to collapse and turn the tide of the war, but we don’t know if that will happen.
What we have seen is that there is an implosion of commercial banking as a result of the sanctions.
Economic sanctions have been imposed on countries like Iran or Venezuela. Is it possible to make some kind of comparison?
Compared to what we’ve done with Iran or Venezuela, these sanctions are hitting hard. But keep in mind that those economies are minuscule next to Russia.
Russia is the eleventh largest economy in the world. Furthermore, the sanctions imposed on Iran have taken years, while the sanctions on Russia have been taken in days.
What Moscow faces is unprecedented in the history of sanctions.
What worries you the most right now?
There are many questions about what the real impact of the measures will be, such as whether banks will remain solvent, whether payment systems will be able to function, whether Russian exports will be hit, or what will happen to insurance markets. and markets to ship the products.
And there are doubts about what will happen to the commodity markets.
We are concerned about what could happen in the global credit markets. If there is a default in Russia, that would have an impact on bondholders.
I’m not saying it will happen but there is a possibility of financial contagion to the rest of the world in that scenario.
If we look at the entire package of sanctions, which ones are the toughest?
Definitely the measures against the Central Bank of Russia. The use of bank reserves is the harshest sanction we can take in the current scenario.
And if economic sanctions do not achieve the desired result, what would be the next step?
It depends on what the expected results are. What we’re trying to do is put enough pressure on the economy that they can’t continue the war.
We are using economic weapons to stop a real war, that is the essential objective.
But who knows if that will happen. Who can know? The worst case scenario would be that you destroy the Russian economy and Ukraine is also destroyed.
You have the Russians fighting the insurgency in the Ukraine, but anything could happen.
And vice versa, what would be the best scenario in the current conditions of the conflict?
That we push Putin so hard that he is willing to negotiate something. The problem is that we have implemented these measures so quickly that I don’t know if there is room for any kind of negotiation.
If you are going to apply the strongest measures you can put in, they will too. You are stuck.
As events have progressed to this point where, despite international pressure, Russia is directly attacking civilian targets, what is Putin really looking for?
We have reached a point where he decided to review history. Putin wants to restore the borders of the Soviet Union starting with Ukraine.
It’s amazing that he can think that’s possible. How can you negotiate with someone like him? If that is his goal and we are not willing to start a war, what is the potential for financial sanctions to work?
It’s hard to tell. What remains for us is to run the financial clock before we run the military clock.
From a more global perspective and although it sounds a bit excessive, how possible is it that we will reach a Third World War?
There are all kinds of accidents in history that can lead to a conflict that you were not able to predict.
In the First World War the conditions were right and only a catalyst was needed for it to be unleashed.
It is impossible to know if there could be a war of these proportions today. But there may be a nuclear threat.
During the Cold War we saw moments when there was the possibility of being on the verge of an escalation, as in the Cuban Missile Crisis.
But there were agreements that de-escalated the conflict. That’s what we’re going to have to look for here. I wonder what the price will be. I wonder if there will be some kind of agreement regarding Ukraine.
For now we are arming the Ukrainians and trying to make it untenable to continue the war. There has to be some way out.
In recent days we have started to see a mass exodus of private companies from Russia. What effects can this exit have and what is behind the decision to leave that market?
Companies that are leaving Russia are doing so because there is political risk, and political risk is business risk.
What would happen if the economic situation became so unsustainable that these companies could not continue to operate or their partners became insolvent? Or what would happen if the Russian government nationalized them?
Added to that is the threat of new financial sanctions being imposed. That is why many Western companies are going to pull out.
On the other hand, there are some sectors of the European economy that are highly exposed to Russia, such as commercial banking and other industries.
And looking at Asia, China is not the best environment for doing business either. So I think this is a time for the transatlantic economy to further consolidate.
- Cecilia Barria
- BBC News World