Following the full declaration of the Russian invasion of Ukraine, which started on 24 February 2022, institutions such as the United States, the European Union, and other Western countries introduced or significantly expanded sanctions covering Russian president Vladimir Putin, other government members and Russian citizens in general. Some Russian banks were banned from using the SWIFT international payments system. The sanctions and the boycotts of Russia and Belarus have impacted the Russian economy in various ways. Nevertheless, Russian authorities have mitigated the impact of sanctions by procuring essential goods from consumer products that are rarely subject to export restrictions, by exploiting globalized supply chains, and by turning toward trading partners who have ignored Western sanctions, such as China, India, Turkey and the UAE.
Background
History of sanctions
Western countries and others imposed sanctions on Russia after it recognised the independence of its occupied territories, the so-called Donetsk and Luhansk People's Republics, on 21 February 2022, in a speech by Vladimir Putin. The sanctions were wide-ranging, targeting individuals, banks, businesses, monetary exchanges, bank transfers, exports, and imports. They included cutting off major Russian banks from SWIFT, the main network for international payments, although there remained limited accessibility to ensure the continued ability to pay for gas shipments. Sanctions also included asset freezes on the Russian Central Bank, which holded $630 billion in foreign-exchange reserves, to prevent it from offsetting the impact of sanctions. By 1 March, the total amount of Russian assets frozen by sanctions amounted to $1 trillion.
Major multinational companies including Apple, IKEA, ExxonMobil, and General Motors, have individually decided to apply sanctions to Russia. Ukrainian along with U.S. and EU governments have explicitly urged the global private sector to help uphold sanctions, and the EU, UK and Australia have also called on global digital platforms to remove Russian-based web sites. Some multinational companies have disengaged from Russia to comply with sanctions and trade restrictions imposed by home states, but also on their own accord, beyond what was required by law, to avoid the economic and reputational risks associated with maintaining commercial ties with Russia.
Several countries that are historically neutral, such as Switzerland and Singapore, have agreed to partial sanctions. Some countries also applied sanctions to Belarusian organisations and individuals, such as President Alexander Lukashenko, because of Belarus' involvement in the invasion.
In response to the invasion, Germany's chancellor, Olaf Scholz, suspended the Nord Stream 2 pipeline and announced a new policy of energy independence from Russia. In addition, Germany provided arms shipments to Ukraine, the first time that it provided arms to a country at war since the end of World War II. Germany also created a €100 billion fund for additional defence expenditures. German industry shifted from reliance on Russian natural gas to producing more energy from renewable sources, importing gas and more coal to provide power and heating while new power generation facilities could be built."German industry supports government gas reduction plan". dw.com. Retrieved 7 July 2022.
Upon his arrival for the NATO extraordinary summit in Brussels on 24 March, U.S. president Joe Biden indicated that further economic sanctions would be placed against Russia, including restrictions on the Russian Central Bank's use of gold in transactions and a new round of sanctions that targeted defense companies, the head of Russia's largest bank, and more than 300 members of the Russian State Duma.
On 27 February 2022, Putin responded to the sanctions, and to what he called "aggressive statements" by Western governments, by ordering the country's "deterrence forces"—generally understood to include its nuclear forces—to be put on a "special regime of combat duty". This novel term provoked some confusion as to what exactly was changing, but US officials declared it generally "escalatory". Following sanctions and criticisms of their relations with Russian business, a boycott movement began and many companies and organisations chose to exit Russian or Belarusian markets voluntarily. The boycotts impacted many consumer goods, entertainment, education, technology, and sporting organisations.
The U.S. instituted export controls, a novel sanction focused on restricting Russian access to high-tech components, both hardware and software, made with any parts or intellectual property from the U.S. The sanction required that any person or company that wanted to sell technology, semiconductors, encryption software, lasers, or sensors to Russia request a license, which by default was denied. The enforcement mechanism involved sanctions against the person or company, with the sanctions focused on the shipbuilding, aerospace, and defence industries.
During a speech at the UN General Assembly in New York City on 20 September, French president Emmanuel Macron asked, "who here can defend the idea that the invasion of Ukraine justifies no sanctions?" He purported neutral states to be "indifferent" towards the conflict."France: No nation can stay 'indifferent' on Ukraine war" apnews. Retrieved 20 September 2022.
On 9 December, Canada imposed new sanctions on Russia, alleging human rights violations. The decision includes sanctions against 33 current or former senior Russian officials and six entities involved in alleged "systematic human rights violations" against Russian citizens who protested against Russia's invasion of Ukraine.
On 16 December, The EU introduced a ninth package of sanctions against the Russian economy. A spokesperson for the Belgian government said, "It is becoming increasingly difficult to impose sanctions that hit Russia hard enough, without excessive collateral damage to the EU.""Analysis: EU unity over Russia sanctions falters as Europe's economy wilts" (16 December 2022). Reuters.
Since 2014, the European Union has applied eleven rounds of sanctions against the Russian Federation. The last 11th round of sanctions in June 2023 focused on dual-use items such as computer chips and as well as an attempt to limit ship-to-ship transactions of sanctioned goods. More suspensions of Russian broadcasting licenses in Europe were also announced."European Union countries agree on a new package of sanctions against Russia over the war in Ukraine" (21 June 2023). AP. Accessed 25 June 2023.
Sanctions
Western countries and others began imposing limited sanctions on Russia when it recognised the independence of self-declared Donbas republics. With the commencement of attacks on 24 February, a large number of other countries began applying sanctions with the aim of devastating the Russian economy. The sanctions were wide-ranging, targeting individuals, banks, businesses, monetary exchanges, bank transfers, exports, and imports.
After Russia invaded Ukraine on 24 February 2022, two governments that had not previously taken part in sanctions, namely South Korea and non-UN member state Taiwan, engaged in sanctions against Russia. On 28 February 2022, Singapore announced that it will impose banking sanctions against Russia for Ukraine invasion, thus making them the first country in Southeast Asia to impose sanctions upon Russia. The sanctions also included materials that could be used for weapons against Ukraine, as well as electronics, technology devices and related equipment, which were listed in a detailed statement on 5 March.
On 25 February and 1 March, Serbia, Mexico and Brazil announced that they would not be participating in any economic sanctions against Russia.
On 28 February, the Central Bank of Russia was blocked from accessing about $300 billion in foreign-exchange reserves held abroad and the EU imposed sanctions on several Russian oligarchs and politicians.DURCHFÜHRUNGSVERORDNUNG (EU) 2022/336 DES RATES vom 28. Februar 2022 (EU) Nr. 269/2014, (German) 3 March 2022 On the same day US Foreign Assets Control (OFAC) prohibited United States persons from engaging in transactions with Central Bank of Russia, Russian Direct Investment Fund (including its predecessor, JSC RDIF, sanctioned previously), the Russian Venture Company, and Kirill Dmitriev, an ally of Vladimir Putin, personally.
Sergei Aleksashenko, the former Russian deputy finance minister, said: "This is a kind of financial nuclear bomb that is falling on Russia." On 1 March, the French finance minister Bruno Le Maire predicted that the West would freeze "almost 1,000 billion dollars" of Russian assets, which would cause a collapse of the Russian economy. By July 2023, Russian assets frozen by the G7 countries and the EU were estimated at $335 billion (€300 billion). On 20 April 2022 the Yermak-McFaul Expert Group on Russian Sanctions arranged by Zelenskyy published an "Action Plan for Strengthening Sanctions against the Russian Federation". The document contained recommendations for the international democratic community regarding further sanctions and economic measures, designed to force the Russian leadership in the shortest possible time to end the war in Ukraine and to punish those who committed war crimes.
In a March interview with 60 Minutes correspondent Sharyn Alfonsi, Daleep Singh, then the U.S. Deputy National Security Advisor, who previously crafted U.S. sanctions in 2014 in response to Russian annexation of Crimea, described the sanctions as the "most severe economic sanctions ever levied on Russia". He added that the U.S. was not "pressing buttons to destroy an economy" and said that the sanctions should have "the power to impose overwhelming costs on your target".
On the morning of 24 February, Ursula von der Leyen, the president of the European Commission, announced "massive" EU sanctions to be adopted by the union. The sanctions targeted technological transfers, Russian banks, and Russian assets. Josep Borrell, the High Representative of the Union for Foreign Affairs and Security Policy, stated that Russia would face "unprecedented isolation" as the EU would impose the "harshest package of sanctions [which the union has] ever implemented". He also said that "these are among the darkest hours of Europe since the Second World War". President of the European Parliament Roberta Metsola called for "immediate, quick, solid and swift action" and convened an extraordinary session of Parliament for 1 March.
Since February, the European Union has sanctioned exports to the Russian Federation at a total value of €43.9 billion and imports to the EU worth €91.2 billion, including financial and legal services.EU sanctions against Russia explained European Council of the European Union. consilium.europa.eu. Accessed 20 April 2023.
In February 2024, the European Union proposed sanctions that would target Chinese companies aiding Russia's war effort in Ukraine.
Fossil fuels and other commodities
On 28 February 2022, Canada banned imports of Russian crude oil. On 8 June, Canada banned services to the Russian oil, mining, gas, and chemical industries.
On 8 March, U.S. president Joe Biden ordered a ban on imports of oil, gas and coal from Russia to the United States.
Also on 8 March, Shell announced its intention to withdraw from the Russian hydrocarbons industry.
Switzerland is a major hub for commodities trading globally. As such, about 80% of Russia's commodity trading goes through Geneva and there are an estimated 40 commodities companies linked to Russia in Zug. Glencore, Gunvor, Vitol, Trafigura and Lukoil Litasco SA are oil and commodities trading firms with stakes in Rosneft and Lukoil, two major Russian oil companies. Magnitogorsk Iron and Steel Works (MMK), a Russian-based company in Lugano, is also a major player in commodities/steel trading with Eastern Europe.