Moscow lashed back angrily against sanctions announced by the United States, vowing a “strong response” to a series of measures unveiled by President Joe Biden against Russian banks and individuals.
"There should be no doubt -- sanctions will meet a strong response, not necessarily symmetrical, but well-calibrated and sensitive for the American side," the Russian Foreign Ministry said in a statement on February 23.
Over the past two days, the United States and its Western allies have set a coordinated effort to punish Moscow with sanctions after President Vladimir Putin said he would recognize the independence bids of territories held by separatists in eastern Ukraine and send troops there.
The move came after Russia amassed at least 150,000 troops on the border with Ukraine, prompting fears of a full-scale invasion.
Fading hopes for a diplomatic solution to the crisis took another blow on February 22 when the White House said that a potential summit between Biden and Russian President Vladimir Putin was off the table for now.
That came after U.S. Secretary of State Antony Blinken said he was calling off his scheduled meeting with Russian Foreign Minister Sergei Lavrov in view of Moscow’s actions against Ukraine.
Other Western allies, including the European Union, Britain, Australia, Canada, and Japan, have also set sanctions against Moscow, often after consultations with Washington.
The United States said it was prepared to respond to further Russian aggression by withholding technology and resources.
"We're going to cut him off from Western technology, cut him off from Western financial resources that will be critical for feeding his economy and also to enriching himself," U.S. Deputy Treasury Secretary Wally Adeyemo told CNBC.
The United States said on February 22 that it would impose its “first tranche" of sanctions on Russia for what Biden said was the beginning of an invasion of Ukraine.
The measures included blocking sanctions on two Russian banks and sanctions to block Moscow’s access to Western financial institutions, Biden said, declaring that Moscow's actions against Ukraine had violated international law.
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The two banks designated are Russia's Promsvyazbank, the bank of the armed forces, and Kremlin-controlled VEB bank, the nation's development bank. Together the two banks hold $80 billion in assets, a senior administration official said in a call with reporters after Biden announced the sanctions.
The United States also sanctioned Aleksandr Bortnikov, the head of Russia's Federal Security Service (FSB); Kremlin First Deputy Chief of Staff Sergei Kirienko; and Promsvyazbank CEO Pyotr Fradkov. Their families are also sanctioned.
The official said that, if the invasion proceeds, Washington is ready to take further action on the largest Russian financial institutions, including Sberbank and VTB, which collectively hold almost $750 billion in assets or more than half of all the assets held by Russian banks.
"This was the beginning of an invasion and this is the beginning of our response. If Putin escalates further, we will escalate further, using both financial sanctions and export controls," the senior administration official said.
Russia invaded and seized Ukraine's Crimea region in 2014 and has since aided separatists in eastern Ukraine in their bloody conflict with the government in Kyiv.
Moscow had denied it was planning to invade Ukraine prior to Putin’s order on February 21 to send troops into the separatist areas, saying they were needed to keep the peace and protect civilians -- claims the West quickly dismissed.
Ukraine took a series of steps on February 23 to bolster its security, calling up military reservists aged 18-60 and preparing to declare a 30-day state of emergency.
However, the country's leaders also strived to ensure that calm was maintained, saying there was no need for a general mobilization of troops at this time and vowing not to give up any of its territories.
It also urged its citizens to avoid travel to Russia and for those there to leave "immediately," citing a possible disruption of consular assistance amid rising tensions.
Ukrainian President Volodymyr Zelenskiy said in comments on February 23 that he and his army were ready to stand against any possible moves by Russia and Russia-backed separatists.
He also said he expects further sanctions on Russia against Ukraine from Kyiv's Western partners.
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In 2014 the United States imposed sanctions against Russia after the annexation of the Crimea. President Putin responded by an extensive diversification which transformed the Russian economy drastically by reducing its dependence on oil and gas exports, cutting imports extensively by manufacturing most of Russia’s needs locally and enhancing trade with China. As a result, the Russian economy not only withstood sanctions but continued to grow significantly.
In 2021 Russian GDP grew at 4.7% and was estimated at $4.32 trillion, the world’s 6th largest economy based on purchasing power parity (PPP).
And despite the harshest sanctions, both Iran and Venezuela continued to export their crude with Iran exporting an estimated 1.5 million barrels a day (mbd) or 71% of its pre-sanctions exports and Venezuela exporting an estimated 1.0 mbd.
Now the United States is virtually begging Iran to reach a new nuclear deal so it can focus its attention on China and also the Ukraine crisis. But the only deal Iran will accept is one on its own terms meaning a lifting of all US sanctions first and no new limitations on its nuclear and ballistic missile development programmes.
Any new sanctions against Russia aren’t going to fare better particularly with support from China who will help Russia nullify their impact exactly as it has be doing in Iran and Venezuela.
In addition, Russia vowed to respond to the new sanctions with ‘strong well-calibrated measures against the United States.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London