As Russian forces move on Kyiv, it's time to get serious about ratcheting sanctions up a notch. The US and Europe have ample room for escalation. A few thoughts on the option set (🧵):
(1) So far, the sanctions effort has focused on Russia's state-owned banks. But only one major bank—VTB—has been fully blocked. A next wave of sanctions could involve full-blocking sanctions against Sberbank, Gazprombank, and other major Russian financial institutions.
(2) There has been a lot of talk about SWIFT. First things first: it is the EU, not the US, that has the authority to cut Russian banks off from SWIFT. All the US can do is apply pressure and persuasion to make that happen. Cutting Russian banks off from SWIFT ...
... is a reasonable option for escalation, but only AFTER those banks have been fully blocked. If the EU were to cut off Russian banks from SWIFT without blocking them first, the impact would be marginal, and perversely, demand to use SWIFT alternatives would increase ...
... So, if we want Russian banks cut off from SWIFT, we must advocate for sanctions against ALL Russian banks first. Per above, only one major bank—VTB—is fully blocked. So there's a long way to go before ALL Russian banks are blocked. Let's not put the cart before the horse!
(3) I see lots of talk about sanctions against Putin directly. Such a step would be reasonable, but let's not overstate the impact. Putin treats the entire Russian economy as his personal piggy bank. Sanctions will not impoverish Putin or change his life in any meaningful way ...
... The best way to target Putin is to erode his popular support in Russia among both everyday Russians and the oligarchs. In other words: tough sanctions against the Russian economy and oligarchs are the best way to target Putin.
(4) @POTUS has been careful to craft sanctions that won't spike oil prices. Unfortunately, oil accounts for ~45% of Russia's export revenues—by far the largest source. Eventually, ratcheting up pressure will require targeting the Russian oil sector ...
... This can come in two forms: First, sanctions on investment in oil projects and oil production itself. These will only affect future production (not current sales), and I see no reason why such measures shouldn't be enacted now.
Second, the US could target Russian oil sales. A dramatic cutoff is probably impossible. Even if it was, it might perversely benefit Putin as oil prices spike. A better approach is to lay out a plan in which the US commits to reduce Russian oil exports to zero over several years.
(5) Some in the media have called SWIFT the nuclear option. Per above, this overstates the case. (I'd also add: No sanctions are "nuclear" in their effect; they're just not that powerful.) In reality, the most impactful sanction would be to fully block the Central Bank of Russia.
... Putin has touted his >$600b in foreign exchange reserves. If the US and EU were to block the Central Bank of Russia, much of those reserves would become unusable. Putin's rainy day fund would all but evaporate.
(6) The US should be judicious in applying these sanctions. None of them is worth a nasty food fight with the EU. I suspect as Putin's aggression becomes uglier, it'll be easier to secure transatlantic unity for tough measures. Some patience may be warranted.
(7) Unless a miracle happens and Putin pulls back from the brink, I suspect many of these escalatory steps may happen in the weeks and months ahead. The only questions are: How soon will they happen? And how united will the US and its allies be behind them? /end
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