Ukraine crisis: talk centres on SWIFT, Nordstream and arms support
As the drumbeats of war grow louder from the Russia/Ukraine border, there is swirling speculation as to what sanctions the West would or wouldn’t impose by way of deterrence or response to any act of aggression by Moscow against Ukraine. Conversations appear to centre on three options: a permanent closure of the Nordstream2 pipeline, with profound effects for both Russian foreign revenues and European (especially Austrian and German) energy security; cutting off access to the SWIFT payment system; and exporting greater quantities of defensive capabilities to Ukraine to enhance its armoury of deterrents.
On 12 January, US senators led by Bob Menendez, introduced the Defending Ukraine Sovereignty Act of 2022, which, said its sponsors, ‘Would impose crippling sanctions on the Russian banking sector and senior military and government officials if President Putin escalates hostile action in or against Ukraine,’ also prohibiting transactions on Russia’s primary and secondary sovereign debt and authorising sanctions on Russia’s extractive industries ‘as well as on providers of specialized financial messaging services (e.g., SWIFT).’
It also urges the expedited transfer of defence articles to bolster Ukraine’s defence capabilities, ‘authorizes $500 million in supplemental emergency security assistance to Ukraine in the event of a re-invasion by Russia [and] also expands U.S. efforts to counter Kremlin disinformation and strengthen ties with key regional partners facing Kremlin aggression.’
Announcing the bill, Menendez said, ‘As the Biden administration seeks a diplomatic path forward this week in Europe to avoid another bloody escalation in Ukraine, I find little reason to believe that Putin is negotiating in good faith nor do I believe he has any newfound respect for Ukrainian sovereignty and territorial integrity. That is precisely why we are coming together to send a clear message – Putin need not collapse his entire economy nor does he need to sacrifice the lives of his own people in a futile attempt to rewrite the map of Europe. Ultimately the most effective sanction on Russia is a strong and unified Ukraine, and I look forward to working with my Democratic and Republican colleagues so that we can provide the people of Ukraine the type of support they need to confront the bully in Moscow.’
In Germany, Berlin-based trade lawyers told WorldECR, there is considerable disagreement as to what sanctions should be threatened or precluded from negotiations. ‘Putin can take advantage of the fact that not only the Germany parliament, but the German government, is divided on issues such as whether to threaten to permanently close the Nordstream2 pipeline, cut off access to SWIFT, or export defensive capabilities to Ukraine,’ said one, adding that the potential for lack of alignment across the European Union perspective would ‘strengthen Russia’s hand’.
The lawyer said that, were strong sanctions to be imposed, many German SMEs or ‘Mittelstand’ companies would be hard hit. ‘This is why Germany must be a very strong voice in whatever decisions are made about sanctions,’ they said.
There have been media reports that cutting off access to SWIFT, regarded as the ‘nuclear option’, has already been precluded as a viable or desirable option by politicians in Berlin and Brussels.
