Thread by @DAlperovitch

There is a lot of current discussion about the types of severe sanctions that the US would place on Russia in the event of invasion, but not as much about how Russia can hit back at the US and European economies in response 🧵

Western sanctions on Russian oil and gas industry (except for NS2 pipeline), as well as blacklisting them from SWIFT bank payment system, seem to be off the table
reuters.com/world/europe/s…

Sanctions on NS2 seem to be a certainty but they are not going to matter much to Putin in the event that Russia actually brings Ukraine into its sphere of influence with military force

The primary goal of NS2 for Russia was to bypass Ukrainian pipelines and not have to pay them transit fees or be subject to Ukrainian coercion

If Ukrainian pipelines come under Russian-friendly control, Russia is no longer going to need NS2.

In fact, it is ironic that NS2’s symbolism to the West is so much higher than it is to Russia

But there are numerous public reports about planned sanctions on the top 3 Russian banks (Sberbank, VTB and Gazprombank), as well as use of Foreign Direct Product Rule to ban export of semiconductors to Russia
washingtonpost.com/national-secur…

These sanctions (unless heavily loopholed by exemptions) will have enormous ramifications for the Russian economy and we can expect Russia not to take them sitting down

So what can Russia do in response? Well, in addition to petroleum products, Russia (and Ukraine to some extent) is a huge exporter of a variety of commodities that are critical to the global economy

The US semiconductor industry imports 90% of neon supplies from Ukraine, which Russia could prevent the export of

35% of palladium used in automotive sector, electronics and medicine also comes from Russia
reuters.com/technology/whi…

Commercial jet engines use titanium, much of it from Russia.

Boeing, which relies heavily on Russian titanium giant VSMPO-AVISMA, is "protected for quite a while, but not forever," CEO David Calhoun said on Wednesday
reuters.com/business/aeros…

On Feb 2, Russia banned export of ammonium nitrate, which is used as fertilizer in agriculture. It represents 2/3rd of global production and can cause a significant rise in global food prices

https://twitter.com/DAlperovitch/status/1489338778447757318?s=20&t=uP6C-YMKbZubOOqEipDz1A

And when it comes to oil and gas, it’s not just Europe who is very vulnerable. Russia is now #2 importer of oil into the US (after Canada), after our sanctions on Venezuela’s oil
bloomberg.com/news/articles/…

Russia is sitting lush on $630b+ in foreign reserves so it can withstand export bans for some time
nytimes.com/2022/02/03/wor…

In addition to direct economic pressures, you can also expect a rise in disruptive cyber attacks from Russia - both from non-state but potentially also state actors (GRU, FSB and SVR)

Finally, on the diplomatic front Russia might try to derail the ongoing talks with Iran about curtailing their nuclear program. So far, the Russians have been very helpful in the negotiations. But if we choke their economy, expect their willingness to help to dissipate

You might see them, for example, offer Iranians significant military aid, such as S-400 air defense systems, surface naval ships and submarines. Perhaps even further assistance and knowledge transfer with their civilian nuclear program

We don’t know the exact response to severe economic sanctions that we might see from Russia but it is a good bet that it will be significant and we should be aware that they are not playing with a weak hand here

We could potentially find workarounds against most of these economic responses from Russia but, at a minimum, we should expect further spikes in inflation and pressures on supply chains across numerous critical industries

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