One by one, Western countries this week imposed sanctions on Russia in response to sending troops to the Donbas region and recognizing its pro-Russian enclaves. The package of sanctions, which has been formulated behind the scenes in recent weeks, is only the “first wave”, as the leaders of the countries and blocs have made clear, and still leaves Russian President Vladimir Putin able to evade more severe sanctions if he avoids a broad attack on Ukraine. “If the invasion of Ukraine progresses, sanctions will also be stepped up,” U.S. President Joe Biden threatened on Tuesday.
The sanctions significantly expand the circle of Russian officials who will be exposed to asset freezes and bans on entry into Western countries. They were intended to exert indirect pressure on the Kremlin by threatening to further harm the Russian elites, in a circle considered closest to Putin. The sanctions also constitute a “punishment” for involvement in Russian aggression so far, and a kind of implicit threat to those not currently on the lists regarding the possible future. They include senior ministers, politicians, social network executives and a host of wealthy businessmen.
“The oppressors of the Russian state”
“These people took advantage of their proximity to the Kremlin to oppress Russia,” U.S. President Joe Biden said in a statement Tuesday announcing the sanctions. Denis Bortinkov, Vice President of the VTB, Peter Fredkov, who heads the PSB of the Russian military, and Sergei Kiriynko, who serves as chief of staff to the president’s office and his son Vladimir, who serves as CEO of VK, the popular Russian social network.
Vladimir Kiriynko / Photo: Associated Press, Sergei Savostyanov
The EU has gone a few steps further than the Americans, and tonight decided, among other things, to impose personal sanctions (including a ban on entering Europe and freezing assets) for all 351 Russian lawmakers who voted in favor of recognizing pro-Russian enclaves and asking Russian President Putin to do so. Other names released on the European list are Defense Minister Sergei Shoigu (“because he is leading the military move against Ukraine”, according to a European source) and also the head of the Russian Navy in the Black Sea and the head of the Russian army’s air forces.
Pro-Russian activists celebrate in Donetsk after Putin’s announcement / Photo: Reuters, Alexander Ermochenko
In the business sector, the Union also imposed personal sanctions on VTB President Dmitry Grigoranko and Russian Government Development Bank VEB President Igor Shovlov. The union is also targeting those who are complicit in Russian propaganda, and the false information campaign designed to justify a Russian invasion of Ukraine. Among others, about Margarita Simonian, who heads the RT TV channel that serves as the mouthpiece of the Kremlin, Foreign Ministry spokeswoman Maria Zakharova and also a nationalist presenter from the “Russia 1” channel named Vladimir Soloviev. The Pike News plant, which is suspected of being located in St. Petersburg, on behalf of the Internet Research Agency, including its executives, has also been included in the union’s list of sanctions. Yevgeny Prygozin, a Russian billionaire who finances the agency and is also considered linked to the Wagner mercenary group, as well as his wife and mother who own some of the companies, also entered the banned list.
As of Tuesday, there were only 185 people on the union’s list of personal sanctions following the 2014 invasion of Ukraine. Entry to the list includes an immediate ban on entry into all EU countries and a freeze on funds. The list will now be tripled.
The union also announced that it would exclude the pro-Russian enclaves of Donetsk and Luhansk from the free trade agreement with Ukraine and end economic ties with them. EU foreign policy chief Joseph Burrell tweeted about the sanctions on senior officials, saying it was “the end of the Saint-Tropez celebrations, the Antwerp diamonds and the Milan shopping” for them.
Defense Minister Sergei Shoigu / Photo: Associated Press, Yegor Aleyev
The British, for their part, joined the wave of sanctions in a minor way, when they decided at this stage to settle for a financial boycott of five small Russian banks, and the imposition of personal sanctions on three oligarchs, who have been on the US blacklist since 2018. This is Gennady Timchenko and relatives Boris And Igor Rotenberg.
Tymchenko is at the bottom of the list of the 100 largest billionaires in the world, with an estimated fortune of about 20 billion d. He owns part of Bank of Russia, which is considered very close to the Kremlin, and owns the Volga investment company, which specializes in energy, transportation and infrastructure. Boris Rotenberg owns the largest construction company in Russia, SGM, which also builds gas pipelines and other infrastructure. His nephew, Igor, is a partner in the company and also owns a holding company in Gazprom’s drilling company.
Boris Rotenberg / Photo: Associated Press, Alexei Nikolsky
Signaling on the banks
While in the past sanctions have been imposed on various Russian oligarchs, which have not changed Russia’s position on Ukraine, and have also led to allegations of evasion due to the plethora of passports they hold and the scattering of financial assets, the US has proven to increase sanctions especially in banking. To reporters on Tuesday in a statement that the US “marches beyond sanctions imposed in 2014 (following Crimean annexation, AA)”. Indeed, the first item on the list was “blocking sanctions” – a ban on conducting trade relations with two Russian banks – VEB and PSB (Military Bank).
This is the first time that the US has imposed such sanctions on Russian financial institutions, and it is mainly a “signal” that it will not hesitate to take a similar step regarding larger and more important banks (Sberbank, Gazprom-Bank, etc.) in the “second wave”, if it comes. The current sanctions also apply to subsidiaries of the banks, including the CSKA football club in Moscow, 75% of which belong to the VEB.
Another clause on which Biden stated was well coordinated with the EU and the UK, and includes a ban on Russian government bond trading, with the aim of preventing Moscow from raising debt in international financial markets. Russia has large foreign exchange reserves (which it has been building gradually since 2014), but the move is expected to deprive it of the ability to raise debt quickly if the country faces an economic crisis.
Demonstration in Donetsk Oblast / Photo: Associated Press, Sergei Grits
No heavy cannons
To these sanctions was added the German freeze on the Nord Stream 2 gas pipeline project, as well as personal sanctions on “eight senior Russian executives in the gas and energy industry” announced by Australia. This is in addition to joining the ban on the purchase of Russian bonds by Japan, which also announced personal sanctions on Russian officials whose names have not yet been released.
The first wave of sanctions leaves on the table the more severe sanctions the West has been discussing in recent weeks: Russia’s disengagement from the Swift banking system, a ban on exports of critical components to Russian industry from the EU, a ban on US exports of chips and allies in Asia (Taiwan and Singapore) , And personal sanctions on Putin himself, which have not been imposed at this time.
German Chancellor Olaf Schultz / Photo: Associated Press, Efrem Lukatsky
Sanctions:
● Prohibition of trade with Russian banks (relatively marginal)
● Freezing of funds and bans on entry to Europe and the United States for additional oligarchs
● Prevention of the ability to raise debt in the financial markets of the Russian government
● severance of economic relations between the Union and the pro-Russian enclaves
● Personal sanctions on 351 members of the Russian parliament seeking recognition of the enclaves
● Freezing of the Nord Stream 2 project by Germany