CHAPTER 5 SANCTIONS

Russia was hit by a wave of sanctions immediately after its invasion of Ukraine began on February 24. As conflict dragged on, more and more sanctions were announced.

Russia hit back, with bans on a string of exports until the end of 2022.

The ban covered telecoms, medical, vehicle, agricultural, and electrical equipment, as well as some forestry products including timber.

Further measures could include restricting access of foreign ships to Russian ports.

Russia’s Prime Minister Mikhail Mishustin said the bans would include exports of goods made by foreign companies operating in Russia, such as cars, railway carriages, and containers.

Russia’s former president Dmitry Medvedev warned that assets owned by Western companies that pulled out of Russia could be nationalized.

Those reactions should not have been unexpected

Foreign Governments reacted swiftly to Russia’s action, imposing sanctions related to finance and trade.

The impact was almost instant — the value of Russia’s currency collapsed, a ruble worth less than one US cent. Russia’s inflation rate rose more than 2% in the first week of the invasion, the fastest rise since 1998.

The most significant sanctions were moves against Russian oil. The US, UK and EU all announced bans and restrictions on Russian oil imports.

Russia turned to India to shore up its oil exports. According to two Indian officials, reports said, India was considering taking up a Russian offer to buy its crude oil and other commodities at discounted prices with payment via a rupee-ruble transaction.

India and Russia (then the Soviet Union) had a long strategic relationship. During the Cold War the countries also had military, economic and diplomatic relationships.

After the dissolution of the Soviet Union, Russia inherited its close relationship with India, terming their links as a “special and privileged strategic partnership.”

Some international traders have been avoiding Russian oil to avoid becoming entangled in sanctions, but the Indian official said sanctions did not prevent India importing the fuel.

Work was ongoing to set up a rupee-ruble trade mechanism to be used to pay for oil and other goods, the official said.

Sporting organizations also were quick off the blocks to censure Russia.

Russian and Belarus athletes heading for Beijing for the Winter Olympics in February were turned away by the International Olympic Committee.

FIFA and UEFA announced jointly that they had suspended all Russian international and club teams from their football competitions “until further notice.” That ruled Russia out of its World Cup play-off against Poland.

In the UK, the Government imposed sanctions on Roman Abramovich, one of the world’s richest men, who was owner of the Chelsea Football Club. UK ministers accused him of having “clear connections” to Vladimir Putin’s regime and being among a group of businessmen who had “blood on their hands.”

He was one of seven Russians worth up to 15bn pounds whose British assets were frozen and were banned from travelling to Britain.

Abramovich had already put his ownership of Chelsea on the market, but that plan was in limbo by the freezing of his assets.

Foreign secretary Liz Truss also said oligarchs (wealthy Russians with links to President Putin) would “have no place in our economy or society.”

“With their close links to Putin, they are complicit in his aggression. The blood of the Ukrainian people is on their hands. They should hang their heads in shame,” she said.

Motor racing governing bodies scrubbed competitions held in both Russia and Belarus and prohibited the use of both countries’ flags and anthems, “until further notice.” The Haas F1 team terminated the contract of Russian driver Nikita Mazepin and its title sponsor Uralkali.

The World Athletics Council banned all athletes from Russia and Belarus from competing in World Athletics Series events.

The International Tennis Federation (ITF) suspended the Russian Tennis Federation (RTF) and Belarus Tennis Federation (BTF) from ITF membership and from participation in ITF international team competition “until further notice.” The ITF also canceled all its competitions scheduled for Russia and Belarus.

According to CNN, the world governing bodies of a wide range of sports also imposed sanctions on Russian and Belarus competitors, including suspension from competition and competing under national flags. The sports affected were: archery; badminton, baseball and softball, basketball, biathlon, canoeing, chess, curling, cycling, gymnastics, hockey, ice hockey, judo, pentathlon, rowing, rugby, sailing, skating, skiing, surfing, swimming, taekwondo, triathlon and volleyball.

Public pressure then saw businesses that traded in Russia follow suit.

In a move that seemed to stun Russian people more than any other, McDonald’s, Coca-Cola and Starbucks suspended their operations in Russia.

“We cannot ignore the needless human suffering unfolding in Ukraine,” the fast-food giant McDonald’s said, as it announced the temporary closure of all 850 restaurants in Russia, where it employs 62,000 people.

The impact of the announcement in Russia was immediate; massive queues formed outside McDonald’s drive-throughs and restaurants.

The list of sanctions grew rapidly. Some entities took longer to act than others but eventually read the “mood of the meeting.”

PepsiCo said that despite halting sales in Russia of its flagship beverage, as well as 7Up and Mirinda, it would continue to offer products such as milk and baby food.

“By continuing to operate, we will also continue to support the livelihoods of our 20,000 Russian associates and the 40,000 Russian agricultural workers in our supply chain,” PepsiCo CEO Ramon Laguarta said.

Starbucks, which had 130 coffee shops in Russia, said all operations were suspended.

Yum! Brands, whose approximately 1,000 KFC and 50 Pizza Hut restaurants in Russia were almost all independently owned, announced it was closing operations at the company-owned KFC locations.

The company said it was “finalizing an agreement” to do the same with its Pizza Hut restaurants. All profits from operations in Russia would be redirected to “humanitarian efforts.”

Heineken joined the exodus of Western brands from Russia; the Dutch brewer said the war was “unprovoked and completely unjustified” and it would stop advertising and selling Heineken beer in Russia. Carlsberg followed suit.

Universal Music Group, the world’s biggest label, suspended all operations and closed its offices in Russia.

American movie studios, including Walt Disney Co. and Warner Bros., said they had delayed release of highly anticipated films in Russia.

Netflix Inc. suspended its service that it launched less than a year previously. The company had said earlier it would not comply with a new regulation that required the platform to carry several state-run broadcasters.

IKEA closed its Russian stores, stopped production in the country and stopped all exports and imports to and from Russia and Belarus.

Nike Inc. said it was temporarily closing the stores it owned and operated in Russia,

FedEx Corp. and United Parcel Service Inc. suspended shipments into Russia.

Apple Inc. stopped selling iPhones and other products in Russia.

Russia’s RT News and Sputnik News apps were no longer available for download through Apple’s App Store outside Russia.

Google suspended all advertising in Russia. The country’s communications censor accused YouTube’s video service of spreading misinformation and stoking protests.

TikTok suspended new video uploads and live streaming in Russia in response to a new law threatening prison for anyone publishing what authorities considered to be false information about the invasion. (TikTok, known in China as Douyin, is a video-based social network owned by Chinese company ByteDance Ltd.)

The list of companies suspending or withdrawing activity in Russia grew as the invasion stretched on.

American reports said a team from Yale University that monitored companies with a significant presence in Russia listed about 290 that announced withdrawal from the country.

Sanctions were seen as vital in communicating to Russian people what was happening in Ukraine, information they were being denied by State-run media.

Tim Fort, a professor of business ethics at Indiana University, told the AFP news service: “Russians can survive without the Big Mac, but they may ask ‘why is McDonald’s closed? What’s going on?’ — it’s a more powerful signal in that sense.”

The financial and commercial sanctions were sending a message to Russia that it could not do what it was doing in Ukraine and expect to participate in the international economy.

The European Union went further than financial sanctions: a Formula One driver and a Russian previously linked to a £300 million mansion — that is London’s second largest house after Buckingham Palace — were among 160 individuals added to an EU sanctions list designed to squeeze Vladimir Putin’s “closest circle.”

The economic sanctions imposed on Russia with broad consensus among Western governments along with the voluntary withdrawal of multinationals “is really the best way to deal with Russia,” according to Richard Painter, a former White House ethics lawyer and a professor at the University of Minnesota.

The food, Beveridge and entertainment companies were joined by some worldwide financial industry brands.

Visa Inc. and Mastercard Inc. suspended their Russian operations. Foreigners wouldn’t be able to use their Visa or Mastercard cards for purchases in the country, online or in person. Russian cardholders would still be able to use these cards for purchases in Russia.

American Express Co. also cut off its service in Russia. Globally issued AmEx cards wouldn’t work at merchants or ATMs in Russia, and cards issued by Russian banks wouldn’t work outside Russia on the AmEx network, the company said.

PayPal Holdings Inc. suspended operations in Russia, including its international money-transfer service Xoom.

The financial card pull-back left many Russians stranded abroad without access to funds.

An extensive range of political identities and wealthy oligarchs and their families were subject to sanctions that included freezing of assets, travel bans and blacklisting of businesses.

The US, UK and EU set about freezing the assets of President Vladimir Putin and his foreign minister, Sergei Lavrov, and banned people and businesses from dealing with the Russian central bank, its finance ministry and its wealth fund.

Some Russian banks were removed from the international financial messaging system Swift that enabled the smooth transfer of money across borders. The ban would delay the payments Russia received for its oil and gas exports.

His foreign-held assets were frozen, but President Putin was still allowed to travel to those jurisdictions. The reason for the asset freeze, according to the EU, was his recognition of the independence of Donetsk and Luhansk, ordering the Russian armed forces into those areas and for the full-scale invasion of Ukraine.

Belarus, accused of aiding Russia’s invasion, also faced sanctions from the EU, US and UK.

Other Western allies, including Japan, Canada, Australia and South Korea, also adopted sanctions on Russia.

Russia’s first reaction was to more than double its key interest rate to try to stem the decline of the ruble.

Russian authorities, facing potential economic calamity as Western sanctions took hold, threatened foreign companies hoping to withdraw from the country, with arrests and asset seizures, the Wall Street Journal reported.

Russian prosecutors issued warnings to several foreign entities (via calls, letters and in-person visits) including to Coca-Cola, McDonald’s, Procter & Gamble, IBM and Yum Brands.

Russia also blocked interest payments to foreign investors who held government bonds and banned Russian companies from paying overseas shareholders.

Russia stopped foreign investors who hold tens of billions of dollars of Russian stocks and bonds from selling their assets.

The EU was worried many wealthy Russians would now convert their ruble savings into cryptocurrencies — such as Bitcoin — to bypass the sanctions. Many of the world’s largest crypto exchanges refused to impose a blanket ban on Russian clients.