The unprecedented intensity and breadth of Western sanctions on Russia raise concerns about the overall effect on the global economy and the potential for escalation by Russia, a U.S. sanctions expert said.
“I worry about the implications of destroying the Russian economy for global monetary and macro stability,” Julia Friedlander, director of the economic statecraft initiative at the Atlantic Council said in an interview.
The U.S. and its allies have banned trading in the debt of the Russia’s government and some its largest banks, prohibited sale of key technologies, and cut off its largest banks from the international bank messaging service Swift while allowing provisions for energy-related transactions to continue.
They also took the rare step of sanctioning some transactions with the Central Bank of Russia. That will impair the central bank’s ability to defend the Russian currency, the ruble, which has fallen sharply since the invasion began. Europe has also banned Russian private and commercial airlines from its airspace.
The weekend developments have already caused the ruble to plunge and U.S. stock-market futures to decline.
On the scale of possible sanctions, “this could be 10 out of 10,” said Ms. Friedlander, who was an adviser in the U.S. Treasury’s Office of Terrorism and Financial Intelligence during the Obama and Trump administrations. “We are, with Russia, heading toward an Iran scenario but over the course of several days with a G-20 economy and a major exporter of fossil fuels. It is an unprecedented measure.”
The risks, she said, include the threat that Russia could escalate in turn by cutting off supplies of energy, wheat or other commodities.
She expressed concern that the West has moved so rapidly “that the bottom could come out of the Russian economy in the coming days. And of course, Congress is talking about more escalation.”
It may be better, she said, to move more deliberatively, to observe the effects on markets of already-announced sanctions before dialing up the pressure.
“I support very strong sanctions,” but there needs to be an endgame, Ms. Friedlander said. It may be wishful thinking that Russian President Vladimir Putin will feel compelled to negotiate by an imploding economy, she said.
If instead “we have an impoverished, destroyed Russian economy and Ukraine destroyed, what do we gain from all that?”