After the threat of sweeping sanctions didn't deter Russia's attack on Ukraine, US Treasury Department officials and their counterparts in Europe now face the task of carrying through on their vow to make Russia's economy and its elites pay a price.
Key questions are whether sanctions will work and how to measure their impact.
With inflation already at record highs, a global pandemic that keeps businesses struggling to reopen and an energy shortage throughout Europe, the right way to punish one of the world's major economies can be complex to tease out.
A first round of more narrowly targeted sanctions and threats of much more serious ones didn't keep Russian President Vladimir Putin from announcing the military operation launched Thursday in Ukraine and warning other countries that any attempt to interfere would lead to “consequences they have never seen.”
As Putin spoke, big explosions were heard in Kyiv, Kharkiv and other areas of Ukraine.
Previous sanctions on Russia have aimed at individuals and entities directly involved in Russian misbehavior, but Maria Shagina, a sanctions expert at the Finnish Institute of International Affairs, said sanctions now need to take much broader aim at the economy and banking system to have any chance of influencing Russia's behaviour: “At this point, going middle of the road is not going to deter anyone further, and at this point sanctions can play an important role in trying to deter a further invasion.”
She said options included full sanctions blocking all dealings with important Russian banks to cripple Russia's financial system and steps against oil and gas companies.
“If some sort of light sanctions are implemented, that is going to embolden (Putin) to go further. At least we have to try at this point to damage the economy," she said.
“I can't predict what sanctions can do, but the best thing is not to sit and wait to react, because this is not OK.”
Hours before the attack started, White House press secretary Jen Psaki on Wednesday ticked through a list of factors the Biden administration is watching, describing recent trends of rising borrowing costs for the Russian government, falling foreign investment in the country, increasing weakness of the ruble and shrinking fortunes for the “super-rich.”
She added that all of this had transpired “before the bite even takes place” from the new sanctions that the US and its allies started to roll out Tuesday.
After Putin announced the launch of military operations against Ukraine, President Joe Biden promised the US and allies would announce “further consequences” Thursday against Russia for its “needless act of aggression.”
Experts with knowledge of how the US imposes sanctions say the biggest determinant of the success of such measures won't be in the valuation of Russian markets, the ruble or other assets.
“To be honest, there aren't any formalised systems, processes or procedures where Treasury actually makes that assessment, so that's an interesting shortcoming, but it's a reality,” said Adam Smith, who served in the Obama administration as senior adviser in Treasury's Office of Foreign Assets Control.
“The bigger question is are these going to change President Putin's mind.”
Smith stressed that the market costs of sanctions shouldn't be the only measure of success but they should also include consideration of what they might have prevented.
Citing the limited round of 2014 US and European sanctions issued on various individuals and entities, Smith said Putin “took Crimea, but theoretically without those 2014 sanctions they could've gone into Kyiv.”
He said Treasury and the administration juggle many challenges, but “the task of measuring success is somewhat of a fool's errand.”
The administration, in its first tranche of sanctions Tuesday, moved to cut off Russia's government from Western finance, sanctioning two banks and blocking it from trading debt on US and European markets.
On Wednesday, Biden allowed sanctions to move forward against the company that built the Russia-to-Germany Nord Stream 2 gas pipeline and against the company's CEO.
Nicholas Mulder, a professor of modern European history at Cornell University, says there are sometimes concrete measures of successful sanctions.
He cited the restrictions on Iran's growth, particularly from 2011 to 2015, when crude oil exports dropped by more than half.
In April 2015, then-Treasury Secretary Jack Lew said Iran's economy had shrunk by 20 per cent due to sanctions, according to a Congressional Research Service report.
But Mulder says that since Russia is a massive economy, the mathematics on sanctions enforcement and their success will look different, saying “it quickly becomes difficult in terms of repercussions on global markets.”
That's why sanctions are often imposed on individuals, not an entire economy.
One example analysts have cited of how sanctions can work is China's Huawei Technologies Ltd., the biggest global supplier of telecom switching equipment and once a top smartphone brand.
American officials say it is a security risk and might help Chinese spying, an accusation the company denies.
Huawei is barred from buying most US components and technology under a 2019 order by then-President Donald Trump.
The loss of Google's popular music, maps and other services crippled its smartphone business.
Huawei, the top-selling smartphone maker in early 2020, sold its lower-priced phone brand Honor and has fallen out of the global top five.
US and European sanctions could take a similar approach, barring export of electronic components that Russia's defense industry and economy need but can't produce themselves.
William C. Wohlforth, faculty director at the Dartmouth Institute for Global Security, said the most recent financial penalties should be viewed as a “warning shot across the bow about what could be done.”
“The only indicator that matters is whether it deters Putin from further moves in Ukraine," he said.
“Sanctions on this or that oligarch will have zero effect.”
Mulder said measuring success will also be difficult as Asian economies now take on a larger chunk of trading with Russia than they had in 2014, when sanctions were imposed when Russia annexed Crimea from Ukraine.
“There are ways of adjusting trade,” Mulder said, given that non-European countries will maintain commerce with Russia.