The tragic downing of Malaysian Airlines flight MH17 accelerates pressure on the West to put full "sectoral" sanctions in place targeting entire industries across Russia. The economic disruption could be profound, but the West—backed by a larger, stronger economies and central banks flush with liquidity—is far more resilient than Russia for what is to come.
It is easy to criticize the West's most recent sanctions as incremental and timid. TheEuropean Union last week added 33 individuals and entities to their sanctions list, including senior Russian security service officials and oligarchs. France continues to insist it will provide warships to Russia, and economic interests seem to be blocking tough action. Even the most recent sanctions by the United States only moved to block new debt and equity issuance by a number of energy, financial and military companies. What's more, U.S. sanctions exclude Sberbank, which holds the majority of Russian deposits.
While such criticism is fair, it does not suggest that leaders are being too soft on Russia. European leaders—led by the United Kindom, the Netherlands, Germany and the European Commission—now may be ready to surprise us with sanctions against banks, energy and military companies that surpass the U.S. measures (notably by sanctioning more banks). This is short of the broad "sectoral" sanctions many had hoped for, as the move only blocks a narrow band of new debt and equity. But in terms of institutions, the U.S. and proposed European measures are sufficiently broad in the sense that their effects on the Russian financial system could be systemic. Further, there are compelling reasons to expect that sanctions will continue to be extended in coming months, resulting in comprehensive sectoral sanctions on finance and energy by the end of the year.