Russia-Ukraine war: Economic power is the West's best weapon against Putin

Russia's onslaught has been anticipated for months

Vladimir Putin has done it. Ignoring near-universal condemnation, the Russian president has launched a full-scale invasion of Ukraine, confirming the West’s worst fears. It’s an abominable act of unprovoked aggression that threatens global security and stability. The world’s response must be swift and exacting.

Putin’s actions reflect a willful disregard for international law and the lives of innocent people. They violate the basic principles underpinning the international system: that sovereign nations have the right to chart their own destiny and that borders cannot be changed by force. While being mindful of the risks of military escalation with a nuclear superpower, the U.S. and its allies should now take immediate, coordinated steps to isolate Putin and exert pressure on Russia’s economy.

Russia’s onslaught has been anticipated for months. Putin began to prepare the groundwork for escalation earlier this week with the recognition of two separatist self-proclaimed republics in eastern Ukraine, and a televised meeting that ensured high-ranking officials shared responsibility. On Thursday, he finally slammed the door on a peaceful resolution. Russia, he told citizens in a pre-dawn speech, could not feel safe with the “constant threat” from Ukraine and a “hardening” of NATO’s position. With its forces bearing down on Kyiv, the Kremlin says its objective is nothing less than the “liberation” of Ukraine.

After months of grappling with Putin’s strategic ambiguity and fretting over what would happen in the event of a “minor incursion,” the West now has the benefit of clarity. What, then, can the U.S. and its allies do to restrict Russia’s adventurism and protect civilians?

The West’s military options are limited. Russian forces possess overwhelming superiority over their Ukrainian counterparts. At this point, increasing lethal aid to Ukraine’s military is unlikely to prevent Putin’s annexation of parts of the country.

The U.S. and European governments should instead exploit their greatest strategic advantage over Putin — their economic power — and cut Russia off from the global financial system, with the aim of constraining Russia’s economy. In this regard, the actions already taken by the U.S., U.K. and E.U., while critical, will need to go much further. The U.S. sanctioned the company behind the Nord Stream 2 gas pipeline from Russia to Germany, and Berlin, long hesitant, halted the landmark project. Additional sanctions have been put on sovereign debt, as well as oligarchs, parliamentarians and government officials, including Defense Minister Sergei Shoigu.

On Thursday, the British government announced an asset freeze on all major Russian banks, blocked Russian companies from raising capital in U.K. markets, and imposed sanctions on some 100 members of the Russian elite. For his part, U.S. president Joe Biden sanctioned five major Russian banks holding $1 trillion in assets and moved to deprive Russia of the ability to import Western technology. If Putin’s offensive continues, the West should consider additional measures, including targeting Putin’s personal wealth.

Russia’s vast currency reserves, along with high energy prices and the support of China, will allow Putin to withstand the first wave of penalties. Europe’s dependence on Russian energy, made more intense by Germany’s shortsighted decision to close its nuclear plants, will likely threaten Western resolve. But the Russian economy is too small to sustain a war footing indefinitely. Though sanctions alone won’t dislodge Russian forces from Ukraine, patient and unstinting application of economic pressure remains the West’s most potent weapon for deterring further Russian aggression.

The West should be clear-eyed about the challenge it faces. Putin has exploited years of U.S. disengagement to sow chaos, divide NATO, and attempt to undo Europe’s post-Cold War order. Now he’s attacked a democratic European nation, a country with which his own people have deep ties and little desire to fight. A faltering response by the U.S. and its allies will only embolden others, notably China, to also attempt to advance their interests by force. This is no moment for weakness.