Sanctions on Russia are enough to drag it into an economic recession

President Joe Biden called Russia’s invasion of eastern Ukraine a “flagrant violation of international rights” and, after speaking with US allies, launched the first round of economic sanctions against Moscow after German Chancellor Olaf Schulz ordered the shutdown of the Nord Stream 2 pipeline that would transport Russian gas to Europe in the future.

Speaking from the East Room of the White House, the president, who received Ukrainian Foreign Minister Dmytro Kuleba shortly before, said the United States would impose sanctions on Russia’s sovereign debt and Russian elites, as well as their family members, as a first response to the troop deployment. Russian forces in eastern Ukraine.

Biden also said that the United States will impose sanctions on Russian financial institutions VEB.RF and the Russian Military Bank. VEB.RF is a state company that supports and develops the Russian economy. In partnership with commercial banks, it provides financing for large-scale projects to develop the country’s infrastructure, industrial production and social sphere, enhance its technological potential and improve the quality of life.

The announcement came after Russian President Vladimir Putin recognized the so-called independent republics of Donetsk and Luhansk, and then ordered soldiers from Moscow to enter the Donbass region.

The president made it clear that the United States will implement these economic sanctions for the time being, but that no U.S. forces will be sent to strike Russia despite the deployment of a limited number of U.S. forces in Ukraine. “None of us can be misled by Putin’s statements about Ukraine,” the president said, then added that he had decided to move US troops to Europe along the borders of the Baltic states (Estonia, Latvia and Lithuania) on the eastern side of NATO bordering Russia. .

Biden said his sanctions package, reached with European allies, is already enough to target Putin and Russian elites, and above all cripple Russia’s ability to do business internationally, and likely lead the country toward an economic recession.

The sanctions, which the White House said were imposed on individuals on a list prepared by the Treasury Department’s Office of Foreign Assets Control. Also known as SDNs, (Special Designated Citizens), the list includes individuals and companies owned or controlled by legal entities that act on behalf of a country. Their assets are prohibited and dealing with SDNs, which can be individuals, groups or companies, is prohibited. In particular, sanctions could affect Putin, his family and his circle — Republican lawmakers are looking to punish Alina Kabaeva, a former gold medalist in rhythmic gymnastics at the Athens Olympics who has been Putin’s partner for years — along with a privileged oligarch from the Kremlin’s inner circle.

For historical context, Western sanctions issued when Russia invaded and annexed Crimea in 2014 included trade limits, asset freezes under US jurisdiction, and restrictions on access to the US.

Currently, Russia’s exclusion from the SWIFT financial system is not included in the White House sanctions package. On Sunday, Dalip Singh, Biden’s deputy national security adviser, said, “All options are still on the table, but Swift will likely not be part of the first round of sanctions.”

Officially, the Society for Worldwide Interbank Financial Telecommunication (SWIFT) is a messaging system that connects over 11,000 financial institutions to transfer money around the world. It does not actually hold or transfer funds, but it does allow banks and other financial institutions to alert each other when a transfer is about to occur.

For this reason, excluding a country from the system is tantamount to excluding it from the international financial system. Removing Russia from the SWIFT system would make it virtually impossible for financial institutions to send money into or out of the country, with a backlash for Russian companies and their foreign clients, especially oil and gas buyers. An estimate made in 2014, at the time of the annexation of Crimea, by former Russian Finance Minister Alexei Kudrin, estimated that exclusion from the SWIFT system would have resulted in an immediate 5% loss of its value to the Russian economy.

Congressional Republicans give Joe Biden a lot of advice on how to handle the Ukraine crisis. The Senate is closed these days. But the senators made their voices heard anyway.

For Lindsey Graham, the Republican senator from South Carolina, the sanctions announced by the White House are not enough. “Dear President, you bow to Putin and you lose. The Russian leader is walking on you and our allies. We have a lot of Neville Chamberlains in this world. We need more. [Winston] Churchill”.

Pennsylvania Republican Senator Pat Toomey called for tougher penalties. Tomy said Putin detracted from Ukraine’s sovereignty and added that the invasion would create a humanitarian crisis in Europe by displacing millions of Ukrainians to neighboring countries.

Senators Rob Portman (R) and Sherrod Brown (D) decried Putin’s decision to transfer Russian soldiers to the disputed Ukrainian territories. Russia continues to violate Ukraine’s territorial integrity by sending additional troops to two Ukrainian regions, Luhansk and Donetsk. These are the Ukrainian lands that were mainly occupied by Russia for the past eight years. “They are now adding more troops and recognizing that these two Ukrainian regions are independent, in clear violation of international law,” Portman said. “I support sanctions against Russia and urge the Biden administration to work with allies to join us in ensuring a coordinated response to this ongoing, unjustified incursion into the sovereign territory of Ukraine,” he added.

Brown described Russia’s military incursion into eastern Ukraine as “an act of pure aggression against the Ukrainian people and Ukrainian sovereignty in violation of international law.”

Also with them is New Jersey Democratic Senator Bob Menendez, chairman of the Senate Foreign Relations Committee. “Vladimir Putin’s illegal unilateral recognition of the so-called republics of Donetsk and Luhansk is an unjustified act of aggression and a flagrant violation of international law,” Menendez said.

Joe Biden and Kamala Harris are partly responsible for this crisis. The president and his administration chose an endless, unreliable strategy to respond to Putin’s post-invasion aggression. They have used strange tactics such as declassifying US intelligence and trying to get Putin to back off. “This approach has failed,” said Republican Senator Ted Cruz.