One month into Russian President Vladimir Putin鈥檚 horrific war on Ukraine, the Russian strongman has turned his country into a pariah state on par with Iran and North Korea. We should sanction the Kremlin the same way we sanction those other rogue regimes, isolating Russia and disconnecting it from the global economy. The Biden administration deserves credit for helping Ukraine鈥檚 President Volodymyr Zelensky mobilize international partners and for announcing several initial sanctions. But the White House thus far has settled for a series of half-measures and has yet to unleash the full potential of American economic might.
Here鈥檚 what should happen next.
First, the administration should implement crippling sanctions on Russia鈥檚 entire financial services sector, and pressure SWIFT, the Society for Worldwide Interbank Financial Telecommunication, to disconnect every bank in the country. So far, the White House has imposed fairly modest sanctions on the country鈥檚 central bank 鈥� even that reportedly was done at the behest of the Canadian government 鈥� and a handful of mostly government-owned or -controlled commercial banks. There is far less here than meets the eye, and Putin has plenty of loopholes to exploit.
Because most of Russia鈥檚 largest banks remain connected to the international financial system, Putin鈥檚 bankers are playing a shell game, moving money around, replenishing foreign currency reserves and propping up the value of the ruble. We need to sanction the entire banking industry, not just a handful of cherry-picked targets. We also should impose full blocking sanctions, so U.S. banks must freeze funds and properties associated with designated institutions. And we should authorize secondary sanctions on any foreign party that colludes with these sanctioned banks, to deter others from helping Russia evade our actions and to impose consequences on those that do.
Second, to truly cripple Russia鈥檚 economy, we should target its energy industry, which accounts for some 63 percent of Russian exports. Germany鈥檚 suspension of Nord Stream 2 and President Biden鈥檚 decision to ban U.S. imports of Russian oil are welcome steps. But the administration made an enormous mistake in expressly exempting all energy payments from U.S. sanctions. Shielding Russian energy only rewards Putin鈥檚 strategy of using oil and gas to blackmail Europe; it invites more of the same. It also means that consumers in Europe and elsewhere continue to subsidize the Russian bombs that are reducing Ukrainian cities to rubble.
We understand the reluctance to pressure Germany and other EU members on energy imports. But a compromise is available if the White House just takes a page from the playbook the two previous administrations used to great effect against Iran. In exchange for not being sanctioned by the U.S., countries that persist in buying Russian energy should be required to deposit the payments into domestic, frozen escrow accounts, cutting off the flow of hard currency back to Moscow. Escrowed funds could only be used for Russian purchase of local goods 鈥� or, even better, held in reserve to pay reparations and rebuild Ukraine after the war.
Third, we must eliminate Russia鈥檚 trade surplus, because that鈥檚 what is replenishing Putin鈥檚 war coffers. In addition to energy, we should impose broad sectoral sanctions on other key industries, including minerals and metals, machinery and equipment, chemical products as well as timber. This effective embargo on Russia鈥檚 hard currency-generating exports would cripple the engines of the Russian economy and present Putin and his cronies a stark choice: cease their ruinous war or see the Russian economy itself reduced to ruins.
To be sure, these sanctions will have consequences for Western economies, particularly those European countries that allowed themselves to become dangerously dependent on Russian energy. We can offset some of that harm by ramping up production of U.S. oil and gas, encouraging energy-rich partners in the Gulf to do likewise, and developing alternative supply chains for materials sourced from Russia. In any event, the U.S. and Europe have economies that are larger, more diversified, and more resilient against shocks. We are better positioned to weather an economic storm.
Finally, the administration has begun to sanction a handful of Putin鈥檚 cronies, mostly following the lead of the UK and EU. More robust action is needed to deny Russian oligarchs financial safe havens abroad. We should impose sweeping sanctions on Putin鈥檚 family, and those of his inner circle, to stop them from stashing the money they have looted from the Russian people into prosperous and stable Western economies.
Blocked assets should be seized through legal processes and used to rebuild Ukraine. We should also revoke the Putinists鈥� visas, barring them from traveling to our countries. No more luxury estates in Miami or Aspen. No more weekend getaways to New York.
Moderate sanctions have not induced moderation from Putin on the battlefield. To the contrary, he has escalated dramatically, launching scorched earth attacks on civilian targets like maternity hospitals and a theater sheltering civilians (clearly marked with the word 鈥渃hildren鈥�). Biden says it will take several months for the sanctions he鈥檚 announced to have an effect. Ukraine doesn鈥檛 have that long. In the face of Russia鈥檚 war crimes, the time for half-measures is over. We must use the most powerful economic weapons in our arsenal, and we must use them now. We need to do to Putin鈥檚 economy what he is doing to Mariupol.
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