What sanctions may threaten Russia for recognizing the DPR and LPR

Recognition of the Donetsk and Lugansk People's Republics (DPR and LPR) will result in additional sanctions for Russia, according to international experts interviewed by RBC. The first statements of the European Union and the United States after the signing of the relevant decrees by Vladimir Putin announced relatively mild new restrictions.

Although the administration of US President Joe Biden has mostly talked about a "military invasion" of Ukraine as a trigger for potential sanctions, both senatorial bills introduced in 2022 and containing potential anti-Russian sanctions, the criteria for activating sanctions are spelled out more broadly: in the Democratic package as " significant escalation of hostile actions against Ukraine”, aimed at <...> occupation of the territory of Ukraine or interference in its sovereignty and territorial integrity”, in the alternative project of the Republicans - as an “escalation of aggression” against Ukraine, aimed at “occupation of the territory of Ukraine or interference in its sovereignty and territorial integrity”.

“Recognition [of the DPR and LPR] will kill the MINSK process and, most likely, will entail the entry of the Russian military [into the territory of the self-proclaimed republics] to ensure security. it will look [to the West] much like an invasion of sovereign Ukraine, and I assume that significant amounts of sanctions will follow,” said Brian O’Toole, former senior adviser to the sanctions division of the US Treasury OFAC, to RBC. On the night of February 22, presidential decrees were issued instructing the Russian military to ensure the maintenance of peace on the territory of the DPR and LPR. 

According to O'Toole, among the sanctions for recognizing the DPR and LPR, there will most likely be full sanctions on Russia's sovereign debt (now Americans are only prohibited from purchasing Russian OFZs and government Eurobonds for the first time, transactions on the secondary market are not prohibited) and blocking sanctions (inclusion in the SDN list ) against a number of Russian banks. In addition, we should expect sectoral sanctions against additional Russian industries, against people from the “inner circle” of Russian President Vladimir Putin, as well as against “individuals who support violence,” the American expert believes.

Prime Minister Mikhail Mishustin told a meeting of the Russian Security Council on February 21 that the government had been preparing for possible sanctions for many months. Before that, on February 16, Finance Minister Anton Siluanov promised that Russia was prepared for tough Western sanctions, such as isolating Russian banks from the DOLLAR system. In the case of blocking US sanctions against Russian banks, it is important what kind of banks they will be, Siluanov said. “It is clear that we will ensure all deposits, all settlements with our depositors, including those in foreign currency, in these banks. For this, we have enough foreign exchange liquidity, foreign exchange reserves,” he stressed.