The geopolitical impact of Russia’s unprovoked act of war against Ukraine is hard to overstate and the international response has reflected that. European countries have rushed to re-evaluate their energy and security situation with respect to Russia, and the wider international community has agreed on a sanctions package that is unique in its breadth and ambition to cut off a major economy from the global financial system. 

The scope of financial sanctions announced is unique in modern history with the US’ ‘maximum pressure’ campaign on Iran being the only example coming close to the barrage of measures infliction upon Russia in the past two weeks. US sanctions on Iran were tightened in late 2018 with a further ratcheting up in 2019, which included freezing the country out of the international financial system. As a consequence, Iran’s economy contracted sharply, shrinking by 6.0% in 2018 and a further 6.8% in 2019; inflation shot up from 8% in 2017 to just under 50% in 2020 and still stands at around 35% in 2022.

In Russia, the early fall-out from the implementation of financial sanctions could be seen this week with the ruble losing a third of its value against the US dollar and rating agencies downgrading Russian bonds to ‘junk’ status.