With Putin apparently gearing up for war, indications are that the initial US sanctions package is ready to go. A few points for those trying to parse the sanctions and what they will mean (a short 🧵):
(1) The first wave of sanctions, including restrictions on Russian banks and export controls, will rattle Russia's economy. The Russian government will probably need to step in and rescue some financial institutions. Inflation will spike and the ruble will fall.
(2) That said, the US will hold a lot in reserve. Even after the first wave, there will be ample room for escalation. Oil and gas will likely be left out. As the largest sectors of Russia's economy, they will be prime targets for subsequent rounds of sanctions (if required).
(3) If Iran sanctions are a 10/10 in intensity, Russia sanctions are currently about a 2/10. I suspect first round will take this up to ~5/10. Bottom line: sanctions will be very impactful, but US will retain a lot of room to ratchet up pressure.
(4) If Putin does launch the major war we all fear, my analytical judgment is we will see that ~5/10 gradually approach 10/10 in the coming months. The questions are: How long will it take? Will Biden do it himself or will Congress force the issue with legislation?
(5) The end result is that Russia will be cut off from the global economy. Some firms may preemptively exit Russia, seeing the writing on the wall. Others will stay until forced out. But I don't see a scenario in which anything close to current levels of economic activity persist
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