By Karin Strohecker

(Reuters) – The United States and its allies have begun to coordinate new economic and financial sanctions against Russia following Moscow’s recognition of two regions within eastern Ukraine that were independent. Officials said.

Vladimir Putin signed also a decree allowing Russian troops to be deployed in the region’s breakaway areas. White House officials stated that Moscow did not move to trigger the broad array of sanctions Washington and its allies were working towards in the case of Russian invasion of Ukraine.

Separate, more specific and less harsh sanctions were announced by the White House. Possible sanctions are being considered by member countries of the European Union.

Russia was subject to Western sanctions ever since the 2014 annexation from Ukraine of Crimea. After a Russian spy who was ex-spy in Britain was poisoned, more punitive actions were taken. Russia denies any involvement. A probe into Russian interference in the 2016 U.S. presidential elections resulted in further sanctions.

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

BANKS & FINANCIAL FIRMS

Some banks owned by smaller Russian states are under sanction. Washington placed sanctions on Bank Rossiya for close ties with Kremlin officials in 2014.

Sources claim that the Biden administration is preparing a broad measure to harm the Russian economy. This would reduce the “correspondent banking relationship” between the targeted Russian banks, and U.S.-based banks that allow international payments.

Washington will also use its strongest sanctioning tool to target certain Russian companies and individuals by placing them on Specially Designated Nationals lists. This list effectively kicks them out the U.S. banking systems, bans their trade with Americans, and freezes their U.S. assets.

The sources who are familiar with these planned actions said that VTB Bank (VEB), Sberbank and Gazprombank could be targets. While it’s not known if Russian banks will be added to SDN, the two types of sanctions could severely impact Russia and make transacting in U.S. Dollars difficult.

Russia’s major banks are well integrated in the global financial system. This means that sanctions may be felt even beyond Russia’s borders. According to data from the Bank of International Settlements, European banks hold nearly $30 billion of Russia’s exposure.

Russia’s central banks data shows that total Russian foreign banking assets and liabilities reached $200.6 billion, and $134.5 million, with the U.S. dollar sharing amounting to 53%, down from 76-81% 20 years ago.

Britain threatened last week that it would block Russian companies raising capital in London. London is Europe’s financial hub for such transactions. Boris Johnson, Prime Minister of Russia, stated that Britain will be targeting Russian banks and Russian corporations.

INDIVIDUALS

The common tool of sanctioning individuals via travel bans or asset freezes is to place sanctions on them. This has been used by the United States, Britain and the EU against many Russians.

On Monday, the EU imposed sanctions against five individuals who participated in Russian parliamentary elections that were held in annexed Crimea during September 2021.

The United States used SDN to punish oligarchs it considered “bad actors” but has been more careful in recent years. After 2018 sanctions against Rusal, which saw aluminum prices rise and forced Washington to rescind.

In January, the U.S. Senate Democrats unveiled a bill that would impose broad sanctions against Russia’s top military and government officials. The President Joe Biden indicated that he was open to personal sanctions being considered for Putin.

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

Britain, home to many rich Russians, has threatened to expose company and property ownership on its soil in case Russia invades Ukraine. Johnson stated that there was “an issue (with Russian money) in the City of London”.

CHIP CURBING

The White House told America’s chip industry that it is ready to impose new sanctions on Russia exports in the event of a Russian attack on Ukraine. These restrictions could also include blocking Russia’s access global electronics supply.

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

ENERGY CORPORATES & NORD STREAM 2

Already, the US and EU have placed sanctions on Russia’s defense and energy sectors. Gazprom, the state-owned gazprom, its oil arm Gazpromneft, and Lukoil and Rosneft, as well as oil producers Lukoil and Surgutneftegaz, are all currently under United States/EU sanction.

There are many options for expanding and deepening sanctions, including the possibility of preventing companies from settling in U.S. Dollars.

Nord Stream 2, a newly completed pipeline connecting Russia and Germany, has not yet been approved by regulatory authorities. According to Karl Nehammer, the European Union could also sanction Nord Stream 2.

When it comes to sanctions on this sector, Europe’s dependency on Russian energy sources weakens the West.

SWITCHING WITH SWIFT

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

SWIFT shut down Iranian banks in 2012 after international sanctions were imposed on Tehran for its nuclear program. According to the Carnegie Moscow Center, Iran suffered a loss of half its oil export revenues as well as 30% in foreign trade.

The United States and Germany are likely to suffer the greatest losses from this move among Western countries. They have been the largest SWIFT recipients with Russian banks in the past, according Maria Shagina of the Carnegie Moscow Center.

When Russia annexed Crimea in 2014, there were calls for Russia to be cut off from SWIFT. Moscow developed an alternative messaging platform, SPFS.

SPFS sent about one fifth Russian internal traffic messages in 2020. The central bank plans to boost this number to 30 per cent in 2023. SPFS, however, has had a difficult time establishing itself internationally.

SOVEREIGN DUT

Russian bonds have become more restricted in access and there are sanctions that could further restrict Russian bond trading. This includes a ban of secondary market trading both Russian Eurobonds as well as Russian rouble bonds, known as OFZs.

Biden prohibited U.S.-investors from buying Russian rouble bonds starting April 20, 2021 over allegations 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. A country with lower debt has a better balance sheet but is less likely to have access to financing that would support its economic growth.