In the works: 'Mother of all sanctions' against Russia
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Leaders on both sides of the Atlantic are close to approving an economic and financial package known as the "mother of all sanctions" as Russia continues to boost troop numbers near the border with Ukraine. Among the penalties under consideration are cutting Russia off from international payments network SWIFT, targeting its largest financial institutions, and depriving the country of key technologies like artificial intelligence, quantum computing and semiconductors. Vladimir Putin and Russian oligarchs are also in the line of fire, as well as the nation's crowned energy sector and even the Nord Stream 2 natural gas pipeline. Oil and gas stocks maintain torrid pace, up 5% this week and 18% YTD.
Quote: "We cannot have a Munich moment again," declared U.S. Foreign Relations Chairman Bob Menendez, referring to the 1938 pact that sought to avert war by giving up parts of Czechoslovakia to Hitler (who announced the Sudetenland was his last territorial claim in Europe). "Putin will not stop if he believes the West will not respond. We saw what he did in 2008 in Georgia, we saw what he did in 2014 in pursuit of Crimea. He will not stop."
The sanctions would only go into effect if Russia invades Ukraine, but there is still discussion on what the triggers would be and how far Moscow would have to advance to see the damaging consequences of the package. The West imposed some sanctions on the Russian economy after the annexation of Crimea in 2014, but those would pale in comparison to the restrictions currently under discussion. A meeting at the United Nations Security Council also didn't do much yesterday, with both sides accusing each other of being "provocative."
Thought bubble: The U.S. has to make sure the sanctions don't end up backfiring, especially if they freeze sales of sovereign bonds, slam the domestic stock market or devalue Russia's currency. Talk of Western sanctions has already led the ruble to plunge more than 10% against the greenback since October. Washington is also discussing energy reserves in case Moscow freezes exports, while the National Security Council has been in touch with Wall Street's biggest banks about the stability of the global financial system in the wake of the potential sanctions.