Get all your news in one place.
100’s of premium titles.
One app.
Start reading
ABC News
ABC News
Business
Joanna Robin and Jade Macmillan in Washington DC

The United States has announced the first wave of sanctions on Russia after the invasion of Ukraine. Here what's next

US President Joe Biden has announced a swathe of financial sanctions in response to Russia's invasion of Ukraine. (AP: Alex Brandon)

As the Biden administration pushed publicly to avert a crisis in Europe, its officials privately gamed out scenarios for a Russian invasion of Ukraine.

The result was a playbook for the White House to follow if and when the Russian troops amassed at Ukraine's borders mobilised.

After a months-long diplomatic stand-off, Russian forces entered eastern Ukraine following Russian President Vladimir Putin officially recognising the independence of the separatist-held regions of Donetsk and Luhansk.

The threat of cyberwarfare also remains high after Ukraine was hit by the most aggressive cyber attack in its history, which has since been traced back to the Kremlin.

The response from Western leaders has been swift.

British Prime Minister Boris Johnson has announced he will freeze the assets of five Russian banks and three individuals, who will also be banned from travelling to the United Kingdom.

Meanwhile, German Chancellor Olaf Scholz has halted the controversial multi-billion-dollar pipeline project known as Nord Stream 2.

US President Joe Biden said Mr Putin's latest move marked "the beginning of a Russian invasion of Ukraine", announcing a swathe of sanctions aimed at severing Russia's financial ties to the West. 

"[You] want to take really strong action against Russia, once Russia has acted," said Max Bergmann, a senior fellow at Centre for American Progress, who previously served in the US Department of State.

Until a full-scale invasion becomes a reality, he said, the Biden administration must continue its "diplomatic dance".

"I think that when that happens, it'll be quite shocking," Mr Bergmann said. 

"And then the Biden administration is going to want to not have shot every bullet out of its arsenal already."

In 2014, the Obama administration — and its allies in the European Union, Canada and elsewhere — took more than six months to roll out sanctions in response to Russia's illegal annexation of Crimea.

Those sanctions hurt the Russian economy but failed to stop Mr Putin from making the biggest land-grab in Europe since World War II.

"[There's] an argument that the 2014 sanctions deterred Russia from grabbing more territory from the Ukrainians at the time," said Christopher Miller, an assistant professor at The Fletcher School at Tufts University and author of Putinomics: Power and Money in Resurgent Russia.

"There was discussion of, 'Will Russia go all the way to Kyiv?', for example. It didn't do that. And sanctions might be part of the answer for why.

"But it's clear that the sanctions weren't tough enough to get Russia out of Ukraine fully and it still occupies parts of Ukrainian territory."

Mr Biden said today's sanctions go "far beyond the steps implemented in 2014".

"And if Russia goes further with this invasion, we stand prepared to go further as with sanctions," he said.

Step one: 'Squeeze the Russian economy'

The first step involves blacklisting Russia's big banks and oligarchs.

Mr Biden announced full blocking sanctions on two large Russian financial institutions, VEB and the military bank Promsvyazbank, which is also on the United Kingdom's sanctions list.

He also promised comprehensive sanctions on Russia’s sovereign debt.

"That means we've cut off Russia's government from Western finance. It can no longer raise money from the West and cannot trade in its new debt on our markets or European markets either," he said.

Deputy national security adviser Daleep Singh told a recent briefing that the financial sanctions had been designed to impose "overwhelming and immediate costs to the largest financial institutions, and state-owned enterprises in Russia".

"They've been calibrated to maximise alignment with our allies and partners. They're flexible to allow for further escalation or de-escalation, depending on how Putin responds. And they're responsible to avoid targeting the Russian people," he said.

Mr Singh predicted the result would be surging inflation and borrowing costs coupled with a shrinking economy and productive capacity.

"This would be a strategic defeat for Russia pure and simple," he said.

US sanctions are likely to target Russian banks in the first instance. (Reuters: Anton Vaganov, file photo)

The secondary goal is to deter other world leaders tempted to align themselves with Mr Putin.

"[What] we're going to see is a real effort to squeeze the Russian economy in a very comprehensive way," said Max Bergmann, a senior fellow at Center for American Progress, who previously served in the US Department of State.

Hitting banks in this way and cutting off access to Western money means the Russian state will need to bail them out.

"And so that will be incredibly costly to Russia," Dr Bergmann said.

Targeting Putin's inner circle

Next, the focus will move to the oligarchs at the heart of Mr Putin's regime, with Mr Biden announcing plans to impose sanctions on Russian elites and their families.

"They share the corrupt gains of the Kremlin policies and should share in the pain as well," he said.

The primary goal of sanctions from the United States and its allies will be to squeeze the Russian economy. (AP: Alexei Nikolsky)

Dr Miller said while the option might be popular with American politicians, it may not achieve the desired impact.

"A lot of people in the US and in Europe are under the mistaken assumption that oligarchs run Russia," he said.

"And so, somehow, you're going to get the oligarchs to sort of push the Kremlin to change Russian foreign policy, which is backwards.

Mr Bergmann was more optimistic, arguing that focusing sanctions squarely on the top echelons of society may help insulate ordinary Russians from the worst impacts.

Another key element of the Biden administration's plan has already come to pass, with Germany withdrawing key documents needed to certify the Nord Stream 2 pipeline.

A reduction in Russia's ability to export gas and oil, however, could have far-reaching geopolitical consequences.

Energy exports also account for two-thirds of the country's export revenue.

What will happen to Nord Stream 2?

The European Union, which is already in the midst of an energy crisis, depends on Russia for about a third of its natural gas supply.

The gas is pumped through pipelines from Russia, in the east, to heat homes and power industry in the 27-nation bloc to the west, often transiting through Ukraine and Poland.

Russia, through its state-owned energy company Gazprom, has increasingly sought to excise its smaller neighbours from new gas projects, including the controversial Nord Stream 2 pipeline.

The 1,200-kilometre pipeline — which cost more than $15 billion to build and was completed in September — runs directly to Germany under the Baltic Sea.

The Russian President has denied using the Nord Stream 2 pipeline as a political weapon. (AP: Dmitry Lovetsky)

If allowed to move ahead, it would significantly bolster Germany's gas reserves and bring down prices for households, accordingly.

Mr Biden reiterated that the United States would work with Germany to ensure Nord Stream 2 does not move forward, adding that his administration would closely monitor energy supplies and how they could flow on to US consumers.

"As we respond, my administration is using every tool at our disposal to protect American businesses and consumers from rising prices at the pump. As I said last week, defending freedom will have a cost for us as well, and here at home."

Mr Scholz was initially reluctant to further stall the project but did so in light of recent developments in eastern Ukraine.

The United States has long argued Mr Putin was wielding the pipeline as a political weapon to tighten Russia's stranglehold on Europe's gas supply, while depriving Ukraine and Poland of billions in transit fees — a characterisation the Russian leader has denied.

"The Nord Stream 2 pipeline is, essentially, the fifth pipeline that Russia has built to reduce its reliance on Ukraine," said Nikos Tsafos, the chair for energy and geopolitics at the Center for Strategic and International Studies.

"It's a strategy that Russia started to execute back in the 1990s and early 2000s.

Mr Tsafos said there were both commercial and political elements to the choice.

On the commercial side, it is cheaper for Russia to sell gas directly to Germany than to transit it through Ukraine's ageing infrastructure.

"Quite clearly there is a political driver as well, which is that as Russia sees Ukraine [moving] more towards the West, it wants to both limit its interactions with Ukraine [and] deprive a source of revenue for Ukraine," Mr Tsafos said.

"There are lots of different ways to think about why Russia is doing that. Some of them are very innocuous and commercial, some of them are sort of more high strategy.

"But they're all pointing in the direction of wanting a smaller role for Ukraine."

Dr Miller said he believed the pipeline's significance may have been overstated, however.

"The real sanctions are the banking sanctions," he said. "That's what really matters."

Waging an information war

Since 2014, the United States has not only sharpened its sanctions but also its message, according to Nina Jankowitz, a global fellow at the Wilson Center and author of How to Lose the Information War: Russia, Fake News, and the Future of Conflict.

Vladimir Putin has recognised the independence of two Moscow-backed separatist regions in eastern Ukraine and sent "peacekeepers" there.  (Reuters: Alexander Ermochenko)

"[What] we've seen over the past couple of weeks shows that America and its allies are really learning from the way that we were caught off guard in 2014," Ms Jankowitz said.

For months, Biden officials have engaged in a war of words, attempting to disarm false narratives painting the United States, NATO and Ukraine as the aggressors in Europe.

The administration has regularly declassified and shared intelligence — such as the potential invasion dates and details of "false flag" operations — to "pre-bunk" any disinformation or propaganda being spread by Russian state media.

"Frankly, I think that's a pretty good strategy," Ms Jankowitz said.

She said democracies should not engage in counter-influence activities, pointing instead to the example of the Salisbury poisoning in 2019 when the UK government released evidence the deaths of a former Russian double agent and his daughter were orchestrated by Russia's military intelligence agency.

By declassifying intelligence containing details of key dates or planning, the White House may deter the Kremlin from taking certain actions at all.

"We should always be on the side of the truth. And this is kind of shedding light on the truth," Ms Jankowitz said.

"But what might look like victory on the inside of the government may not look very much like victory on the outside."

In the past, the goal of Russian disinformation campaigns inside the United States, Ms Jankowitz said, was distraction, ensuring Americans focused inwards.

Could a cyber attack happen on US soil?

The other lingering threat is that of cyber attacks, which recently knocked out the websites of the Ukrainian army, multiple government agencies, and major banks, according to Ukrainian authorities.

In a subsequent press briefing, Anne Neuberger, deputy national security adviser for cyber and emerging technology, laid the blame squarely on the Russian government.

"Over the last decade, Russia has used cyber as a major part of its military activity beyond its borders, including to undermine, coerce, and destabilise Ukraine," she said.

"For that reason, and at the President's direction, we've been working to prepare for potential cyber attacks since November."

In February, protesters held a "Stand with Ukraine" rally outside UN headquarters in New York. (Reuters: David 'Dee' Delgado)

Ms Neuberger clarified that there were currently no specific or credible cyber threats but the government was working with the private sector to ensure it was protected.

In the past, ransomware hacks have led to the shutdown of critical US infrastructure, including the country's largest fuel pipeline in 2021.

Today, Mr Biden warned that the US was prepared to step up its response in the face of further Russian aggression.

"As Russia contemplates its next move, we have our next move prepared as well. Russia will face an even steeper price if it continues its aggression, including additional sanctions," Mr Biden said.

"The United States and our allies and partners remain open to diplomacy if [Russia] is serious.

"We're going to judge Russia by its actions, not its words."

Mr Bergmann said the US had learned from the annexation of Crimea in 2014 and the eight years of fighting in eastern Ukraine that followed.

"The one lesson from 2014 is the United States can't simply sanction Russia and think that the situation is over and that Russia will respond to US sanctions," Mr Bergmann said.

"What is clear is that it's going to be simply an incredibly intense and tense environment. And the US and the West can't simply shift their focus away from Russia as it has in the past."

Locals in eastern Ukraine have not forgotten the events of 2014. (Reuters: Yannis Behrakis)
Sign up to read this article
Read news from 100’s of titles, curated specifically for you.
Already a member? Sign in here
Related Stories
Top stories on inkl right now
One subscription that gives you access to news from hundreds of sites
Already a member? Sign in here
Our Picks
Fourteen days free
Download the app
One app. One membership.
100+ trusted global sources.