Financial transaction

How could the EU react if Russia invades Ukraine?

As fears grow that a Russian invasion of Ukraine is imminent, there is growing talk of how the West will react.

US Secretary of State Anthony Blinken warned of “massive consequences” if Moscow were to invade, but did not specify what the repercussions would be.

EU foreign ministers met in Brussels on Monday to discuss their own response and were also deliberately vague about what a reaction might look like.

If Putin is to launch an invasion of Ukraine, then there are a range of options on the table for the EU and its allies.

Economic and financial sanctions

Russia has been hit with various rounds of sanctions over the years, each with varying degrees of success. One of the most recent measures launched is to cut the country off from the SWIFT financial transaction system, which is one of the main elements of the global money transfer system around the world.

Cutting Russia off from this network would have serious consequences, making it very difficult for anyone inside the country to conduct any type of financial transaction with the western world and also globally.

However, Professor Markus Ziener of the German Marshall Fund in the United States, says it’s not that simple.

“If they [Russia] would be cut off from SWIFT, it would also affect virtually any financial institution in Russia. Now, what’s the caveat? Ziener told Euronews. “The caveat here is that Russia has amassed hundreds of billions of gold and US dollars. They have a lot of reserves and they also cooperate closely with China.

“So there might be a possibility for Russia to circumvent the impact of these sanctions and that’s kind of a controversial thing. We don’t really know how much it will hurt the Russians.

But cutting Russia off from SWIFT would also create problems for the EU.

For example, a European company buying Russian gas would not be able to pay using the system, which could harm its business.

North Flow 2

It is impossible to mention a Western reaction without mentioning the controversial energy project.

The pipeline, completed last September, aims to connect Russian gas via the Baltic Sea to Germany, and therefore to Europe.

As it stands, it is awaiting the green light from German and European regulators to start delivering much-needed energy supplies to the continent.

Its critics say it weakens European energy independence and can be used as a political tool by Moscow, while its supporters say it is needed to boost EU energy security by increasing supplies.

The United States has long expressed concerns about Nord Stream 2, though they have largely fallen on deaf ears.

But a recent signal from German Chancellor Olaf Scholz has suggested that Berlin may consider shutting down the pipeline in response to an attack on Ukraine.

During a press conference with NATO Secretary General Jens Stoltenberg last week, Scholz answered a question about Nord Stream 2, saying there would be “a high price to pay and everything will have to be discussed in case of military intervention in Ukraine”.

Will the Western allies find unity on Russia?

Despite all the talk about punishing Putin and presenting a united front, behind the scenes there is very little consensus on how to proceed in the event of an attack.

Regarding the SWIFT financial transaction system, Ziener says there is “no clear cut answer” on this.

“Some European countries are saying, let’s not do this. Let’s do it step by step. Let’s not start right away with SWIFT as one of the most massive sanctions we can do,” the professor told Euronews.

Others want to go in the opposite direction and hit Russia where it hurts financially.

With Nord Stream 2, there are EU-wide divisions in every corner, including within the German coalition government.

Scholz’s SDP is more cautious to cut the project short, while the two government partners, the Greens and the liberal FDP, would prefer to pursue a more “values-based” foreign policy.

Berlin has even blocked arms shipments from Estonia to Ukraine because there are German components in those weapons, potentially limiting Kiev’s ability to respond to any attack.

From the outside, it looks like finding a deal between the EU and its allies will be difficult, but for now a united front is presenting itself, with the EU’s foreign policy chief saying on Monday that “Our unity is our strength, and there is no doubt… about it.