By Karin Strohecker

(Reuters) – Western nations have threatened new economic and financial sanctions against Russia if Russia invades Ukraine.

Russia denies any intention to invade Ukraine after deploying troops close by the country. Since its 2014 annexation from Ukraine of Crimea, it has been subject to Western sanctions.

After a Russian spy had been poisoned in Britain, Russia denies any involvement. A Russian investigation was launched into the allegations of Russian interference in Donald Trump’s 2016 presidential election.

These are just a few of the ways that additional sanctions might be used against Russia.

CURBING CHIPS

The White House has told the U.S. chip industry to be ready for new restrictions on exports to Russia https://www.reuters.com/business/white-house-tells-chip-industry-be-ready-potential-russia-export-curbs-2022-01-19 if Moscow attacks Ukraine, including potentially blocking Russia’s access to global electronics supplies.

Similar tactics were employed during the Cold War. Technology sanctions kept the Soviet Union technologically behind, and prevented economic growth.

INDIVIDUALS

A common tool is to sanction individuals through asset freezes or travel bans. Many Russian citizens are already under sanctions by the United States, Britain and the European Union.

The bill, which was not revealed by U.S. Senate Democrats would impose severe sanctions on Russia’s top government officials and military officers, including Putin. However, President Joe Biden indicated that he is open to personal sanctions being considered for the Russian president.

Moscow stated that any attempt to impose sanctions against Putin would be politically destructive, but not his personal safety.

FINANCIAL FIRMS

Some of the smaller Russian state-owned banks have been placed under sanctions. Washington imposed curbs on Bank Rossiya https://www.reuters.com/article/us-usa-sanctions-russia-idUSKBN1492AH in 2014 for its close ties to Kremlin officials.

The options include tightening current, narrowly applied sanctions against state bankers or broadening the list financial institutions which are subject to curbs.

Russia’s banks, which are large and deeply embedded in the international financial system mean that sanctions can be felt well beyond Russia’s borders. Data from the Bank of International Settlements (BIS) shows that European lenders https://www.reuters.com/markets/europe/how-russian-ukraine-conflict-might-hit-global-markets-2022-01-25 hold the lion’s share of the nearly $30 billion in foreign banks’ exposure to Russia.

Although sanctions could be applied to smaller, more specialized banks, they would likely have a less significant impact on Russia’s economy.

Washington might also consider pursuing the Russian Direct Investment Fund, which is state-backed.

ENERGY CORPORATES & NORD STREAM 2

The United States and the EU https://www.reuters.com/article/uk-ukraine-crisis-eu-sanctions-idUKKBN0H02B420140905 already have sanctions in place on Russia’s energy and defence sectors, with state-owned gas company Gazprom (MCX:), its oil arm Gazpromneft and oil producers Lukoil, Rosneft and Surgutneftegaz facing various types of curbs on exports/imports and debt-raising.

One option is to stop companies from setting up in U.S. dollar.

Europe’s dependence upon Russian energy supplies makes it less attractive for the West to sanction this sector. Berlin has signalled it might be ready to take punitive measures over Nord Stream 2 https://www.reuters.com/world/europe/germany-signals-it-could-halt-gas-pipeline-if-russia-invades-ukraine-2022-01-18, a recently completed pipeline from Russia to Germany that is yet to win regulatory approval.

SWITCHING WITH SWIFT

Disconnecting the Russian financial sector from SWIFT would be one of the most extreme measures. SWIFT handles international financial transfers.

In 2012, SWIFT disconnected Iranian banks as international sanctions tightened https://www.reuters.com/article/usa-iran-sanctions-swift-idUSFWN1XK0YW against Tehran over its nuclear programme. The Carnegie Moscow Center thought tank stated that Iran has lost 30% of its foreign trade and half of its oil export revenue.

According to Maria Shagina, a Carnegie Moscow Center researcher, these two countries would be the worst affected by such a move. Their banks are among the top SWIFT users in Russia, and they have the highest frequency with Russian banks.

After the 2014 annexation of Crimea by Moscow, calls to reduce Russia’s SWIFT access came up. This prompted Moscow to create an alternative messaging system called SPFS.

SPFS sent about one-fifth the Russian internal traffic by 2020. The central bank plans to raise this number to 30% by 2023. SPFS is still struggling to make itself known in international transactions.

SOVEREIGN DUT

Russian bonds are now more difficult to access. Sanctions could be further tightened, including a ban on the secondary trading of new Eurobonds and Russian rouble bonds.

In April 2021, Biden barred U.S. investors from buying new Russian rouble bonds https://www.reuters.com/business/finance/exclusive-biden-bar-us-banks-issuing-russian-sovereign-debt-2021-04-15 over the accusations of election meddling.

The 2015 sanctions made it impossible for Russian investors to invest in future Russian currency debt. These measures reduced Russia’s foreign debt by 33% from early 2014. It fell from $733 billion at the beginning of 2014 to $489 billion during the third quarter 2021. While a lower level of debt can improve a country’s overall balance sheet, it also deprives them of funding sources that could support economic growth.