It’s not just seizing yachts and mansions: The West is using a 3-pronged approach to punish Russia
Hillary Hoffower – March 26, 2022
- Russia’s economy is already at risk of a recession due to sanctions by Western powers.
- There are three types of sanctions: government, industry, and individual sanctions.
- From banning oil to seizing oligarchs’ yachts, the US and its allies have been enacting all of them.
Western powers have piled on the sanctions against Russia in an attempt to isolate the country and its economy.
Sanctions are the withdrawal of trade or other financial relationships for foreign policy or security reasons, according to the Council on Foreign Relations, a nonprofit US think tank. They’re a common tactic for preventing an all-out war from breaking out.
This time, they’re part of retaliation against Russian President Vladimir Putin after Russia invaded Ukraine. A month after the invasion began, the Russian economy is now at risk of falling into recession.
That’s because the US, UK, and European Union are pulling out all three types of sanctions. Daniel Gielchinsky, an attorney at DGIM Law, PLLC in Aventura, Florida, who specializes in commercial litigation and finance law broke them down for Insider.
Cut the Russian government out of international systems
A prime example of a government sanctioning another government is the Western effort to block certain Russian banks from accessing SWIFT, a global communications service that clears international financial transactions. Consider a pre-sanction Russian oil sale to the US: It would have cleared through SWIFT.
“If you kick a member nation out of SWIFT, you’re basically telling them you cannot participate in international trade,” Gielchinsky said, adding that it’s the first time in history that a group of governments has done this. “Russia has basically been ostracized from the international economy.”
The US also froze $630 billion in assets held by the Russian Central Bank, preventing the country from using that pile of international reserves to finance its attack on Ukraine or prop up the economy. Such sanctions are unheard of, escalating the economic punishment against Russia.
Sever ties with certain businesses and industries
Because this tier of sanctions involves severing ties with certain types of businesses and industries, they’re kind of a subset of a sanction against the government, Gielchinsky said. “You’re saying, ‘We won’t buy from them. We won’t sell to them. And anyone who’s buying or selling from them, we won’t do business with them either.'”
That was President Joe Biden’s intention when he announced earlier this month that the US would ban all Russian energy imports, which would affect imports of Russian oil, liquefied natural gas, and coal. A few days later, the US also banned imports of Russian seafood, vodka, and diamonds.
High-end exports to Russia, including watches, cars, and high-end alcohol, are also on the ban list of the US and some of its European allies. The White House estimated those exports amounted to $550 million a year.
These kinds of sanctions can be “very tough,” Gielchinsky said.
Hit key players where it hurts
Western alliances have been increasingly hitting powerful Russian elites with personal sanctions. This is the rarest form of sanction, Gielchinsky said, adding that it’s a “very harsh” measure.
The oligarchs targeted here are what Gielchinsky calls “Putin’s inner circle of very wealthy people.”
“They support his campaigns. They support his policies,” he said. “Their companies generate the wealth, the jobs, the votes that he needs to stay wherever he is and to keep the country moving. When you call out these individuals, it’s a very strong statement, as close as you can get to calling out the president himself, which just doesn’t happen.”
So far, the US, UK, EU, and Canada have all frozen oligarchs’ assets in participating countries and banned them from conducting business there. Some US lawmakers are also hoping to pass legislation that would allow the federal government to seize oligarch assets valued above $5 million, such as real estate and yachts. The measure would fall in line with sanctions already implemented by other countries, such as France, which recently seized a $120 million superyacht owned by the Russian oligarch Igor Sechin.
With sanctions like this, Gielchinsky said, governments are saying, “‘We’re coming for you.'”