I've been taking a break from commenting on current events as I finish my book. But I've been asked a lot about reports that Russia is now shipping oil without Western services and thus skirting the price cap, so I'm making an exception.

My thoughts (🧵):
ft.com/content/cad37c… (1) Does this mean the price cap is faltering? In short, yes.

It was always clear that Russia would eventually be able to ship most (if not all) of its oil without Western services. The USG seemed to think it would take a long time. But it seems to be happening quickly.

As we approach the one-year mark of Putin's brutal attempt to conquer Ukraine, how are sanctions working? What should the US and its allies do on sanctions in the year ahead?

A quick 🧵on my new essay in @ForeignAffairs:
foreignaffairs.com/ukraine/tool-a… (2) Russia's economy has been more resilient than expected. But the outlook is bleak. By cutting off Russia from foreign technology + investment and slashing its oil revenues, sanctions are destroying the economic model Putin relies on to pursue an imperialist foreign policy.

In the last few months, @USTreasury has signaled it would ramp up enforcement of secondary sanctions on foreign companies providing support to Russia's military-industrial complex.

This week, we've gotten a clearer picture of what that means. A short 🧵: (1) First, a definition: Secondary sanctions involve the US imposing penalties on foreign firms that support targets of US sanctions—eg, if the US were to sanction a Chinese firm that provided material support to a sanctioned Russian defense company, that's a secondary sanction.

Today, the G7 formally endorsed a price cap on Russian oil sales. This plan has been in the works for months. Many doubted it would get across the finish line.

Bottom line: This is a big deal. It will erode the Kremlin's most critical source of revenue: oil exports (🧵): (1) First things first: Oil is the lifeblood of Russia's economy. In recent years, oil has accounted for 30-40% of the Kremlin budget. But sanctions have caused a 15% decline in Russia's non-oil revenues. The result is that oil is playing an increasingly essential role for Putin.

As the EU weighs sanctions against Russia's oil sales, a question looms: What to do about non-EU buyers of Russian oil?

If China and India ramp up purchases of Russian oil, it could negate the impact of EU sanctions. Thankfully, the West can do something about it (🧵): (1) The West can require all payments for Russian oil—whether from China, India, or elsewhere—to accrue in escrow accounts outside of Russia. To enforce this requirement, the West will need to use both positive and negative incentives.

The US just announced a new raft of sanctions on Russia.

Bottom line: This is the biggest new round of sanctions since the Central Bank of Russia action more than a month ago. But there are still gaps that need to be closed. Quick analysis (🧵): whitehouse.gov/briefing-room/… (1) The US imposed full-blocking sanctions on Sberbank, by far Russia's largest bank, as well as Alfa Bank, the largest private bank in Russia. Energy transactions are still carved out. But Russia's banking sector is increasingly cut off from the global financial system.

As Russia's brutal atrocities in Ukraine come to light, gaps in sanctions that allow ongoing business with Russia are becoming hard to justify.

@crmiller1 and I argue in @ForeignAffairs that the West should maximize sanctions now. A few key points (🧵): foreignaffairs.com/articles/ukrai… (1) The sanctions that are currently in place will push Russia into a deep recession this year. But Russia continues to rake in about $1 billion every day selling energy. As a result, Russia's financial position remains strong and its current account is still in surplus.

Sanctions against Russia have been unprecedented in speed, the scale of targets, and international cooperation.

But they are NOT comprehensive. They remain a 7/10 or 8/10 in intensity, not a 10/10.

A few myths that require correcting (🧵): (1) Not all Russian banks have been cut off from SWIFT. In fact, the EU has cut off just 7 Russian banks from SWIFT. Of the 5 largest Russian banks, just one (VTB) is banned from SWIFT. Sberbank, which is by far Russia's largest bank, retains access to SWIFT.

As the US & EU discuss cracking down on sanctions evasion, I'm hearing more and more chatter about "secondary sanctions."

What are secondary sanctions? How might they be applied to Russia?

A semi-technical explainer 🧵: (1) First, we must understand "primary sanctions"—the plain vanilla sanctions the US has used thus far. Primary sanctions ban US firms from transacting with listed Russian entities—e.g. VTB is under primary sanctions, so no US firm can deal with VTB and its US assets are frozen.

The Russian government made $117 million in bond coupon payments, averting a sovereign default.

How was this possible? Does this mean sanctions aren't working? A short 🧵:
reuters.com/world/europe/r… (1) How was this possible? Simple answer: Because the US Treasury is explicitly allowing these payments through May 25, per General License 9A (home.treasury.gov/system/files/1…). So the USG has determined that, for now, it's in our policy interest to allow Russia to service foreign debts.

Should the US and Europe lay out explicit conditions for the removal of sanctions on Russia?

No, they should not. In fact, doing so would be premature and counterproductive. Here’s why (🧵): (1) First things first: It is up to the Ukrainian government, not the US or anyone else, to decide what type of peace agreement would be acceptable. Is a ceasefire or the removal of Russian forces enough? Is Ukraine willing to accept neutral status or the loss of territory? ...

The West's economic pressure campaign against Russia has advanced rapidly.

But many questions remain, including how much further sanctions can go and whether they can change Putin's calculus.

I discussed w/@tunkuv in the @WSJ. A few highlights (🧵): wsj.com/articles/the-w… (1) The scale of the sanctions is unprecedented—and the single most significant sanction is the one that targets the Central Bank of Russia. To picture the scale, the CBR has roughly $640b in assets; whereas, at its peak in the early 2010s, Iran's entire GDP was around $550b.

Putin's war shows no sign of letting up. It's time to impose sanctions on the lifeblood of Russia's economy: Oil

Oil is the weak spot in the pressure campaign. It doesn't have to be.

Here's how the US & Europe can cut Russian oil sales while limiting adverse side effects (🧵): (1) First things first: Russia's economy is heavily dependent on oil sales. Russia exports 5m barrels of oil per day. This accounts for roughly half of Russia's export revenues—by far Russia's largest source of cash. Oil adds >$100b to the Kremlin's coffers each year.

The US just unveiled the details of its sanctions against the Central Bank of Russia. Bottom line: This is close to the most ambitious form that this action could take. Here's my initial analysis (🧵): (1) As I explained on Saturday, the joint statement hinted at limited sanctions against the CBR. Not blocking sanctions (i.e., asset freeze and transaction ban), but something more scalpel-like to prevent the CBR from undermining other sanctions.

https://twitter.com/edwardfishman/status/1497703033479831557

The US, EU, Canada, & the UK just released a joint statement committing to several major sanctions actions, including a SWIFT ban and restrictions on the Central Bank of Russia. This is a big deal, but details will matter. Here's my initial analysis (🧵):
ec.europa.eu/commission/pre… (1) On SWIFT, the allies committed to remove "selected" Russian banks from SWIFT. This is a good move. It means that the allies will couple blocking sanctions with targeted SWIFT bans. Only banks that are sanctioned will be blocked from SWIFT. It will not be a blanket SWIFT ban.

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.

Putin's unprovoked war against Ukraine is a crime against humanity. No sanctions can be proportional to the violence wrought upon Ukraine. The least the West can do is impose "swift and severe consequences" as @POTUS has promised.

A few thoughts on what this should look like: (1) Step 1 should be a hammer blow against Russia's financial sector. What does that mean? Full-blocking sanctions against all major state-owned Russian banks. VEB, targeted on Tuesday, is the fifth-largest Russian financial institution. Sanctions on the others should follow.

What do today's first wave of US sanctions mean? A short 🧵 ... (1) The US imposed full-blocking sanctions on VEB, the fifth-largest Russian financial institution. VEB serves as a policy instrument of the Russian state. Why does this matter? It's the first time the US has used its toughest sanctions tool on a major state-owned Russian bank.

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.

.@POTUS said he is "convinced" Putin has decided to invade Ukraine. It was a chilling statement and an ominous sign of what lies ahead. If Putin does invade, the US will follow up in short order with its threat to impose sanctions. A few thoughts on what that means: (1) The US sanctions package will be very strong—at least an order of magnitude tougher than 2014. What does that mean? Not Iran-level sanctions (yet), but starting down that path: the largest Russian banks will be cut off from the US financial system ...