By Philip Blenkinsop
BRUSSELS (Reuters) – Western sanctions will not halt Russia’s invasion of Ukraine and will need to be expanded and sustained for a long time to hurt the Russian economy, economists and analysts believe.
The European Commission said on Friday that sanctions agreed with the United States and allies on Russia’s financial and energy sectors and export curbs on technology should limit the ability of the Russian “regime” to finance war.
Jacob Kirkegaard, senior fellow at the German Marshall Fund, said export controls on technology might directly impact Russia’s military if a protracted conflict left it short of the chips that go into missiles.
But, like others, he sees sanctions as more a long-term broader economic play.
“The way to think about economic sanctions is a tool to encourage regime change in the long run. For this to work, it does not matter how much we do now, but how long we can maintain the unity for,” said specialist analysis service Eurointelligence.
Guntram Wolff, director of think tank Bruegel, said sanctions needed to be in place for the long-term and a key part of that is Europe’s ability to wean itself off Russian gas, which could present a challenge next winter, with sustainable energy unable to make up the shortfall.
“This could mean we have to heat less and break taboos, such as firing up coal or nuclear plants,” he said.
He also said that a major omission in current sanctions was asset freezes of Russia’s oligarchs, a measure not hitting the average Russian and perhaps more likely to cause Putin a headache.
There are already question marks over the unity of planned financial sanctions, which sees the United States targeting Russia’s two biggest banks and the EU focused on smaller firms.
Removing Russia from the SWIFT global payments system was one option mooted, which would make it more complicated to transact payments, even though there are new rivals to SWIFT that Russians could use.
EU officials point to the 80 billion euros ($89.9 billion) of exports to Russia that would be lost and problems paying for the natural gas EU members such as Germany and Italy rely on. But there are growing EU voices calling for SWIFT to be included in a further package of measures.
China is also likely to play a major role in the collective sanctions, particularly after it declared a “no-limits” partnership with Moscow earlier this month. It has not imposed sanctions on Russia.
“The role of China is key. It has the ability to help Russia circumvent technology sanctions as well as aid the financial sector,” said Kirkegaard. “But the EU and the U.S. will learn to finesse these and hit in other ways that crack down on the China path as well.”
($1 = 0.8897 euros)
(Reporting by Philip Blenkinsop. Editing by Jane Merriman)
