The US, the EU, Japan and the UK have unveiled a range of economic and financial sanctions against Russia. The moves came in the wake of Russian President Vladimir Putin's ordering troops into the separatist-held regions of Donetsk and Luhansk in eastern Ukraine.
Putin also recognized the independence of the two regions, despite the fact that they are part of Ukraine under international law.
What kind of sanctions have been announced?
The sanctions target different areas, hitting specific financial institutions, Russia's capacity to raise sovereign debt on international markets as well as several individuals. Germany has also indefinitely postponed certification of the controversial Nord Stream 2 pipeline, a completed but not yet operational Baltic Sea gas pipeline which connects mainland Russia with Germany.
On Thursday, US President Joe Biden said the Russian financial institutions VEB and Promsvyazbank would be targeted. The UK has hit Rossiya, IS Bank, GenBank, Promsvyazbank and the Black Sea Bank.
The EU says it will target 351 members of the Russian parliament with sanctions, as well as 27 individuals and entities it says are undermining Ukraine's sovereignty. The US and the UK will also target several wealthy individuals. The EU has not yet named the institutions it will hit, but sources familiar with the plans told the Financial Times that VEB and Promsvyazbank will be on the list.
Promsvyazbank is a military bank and is the only one of those targeted which is on the Russian central bank's list of systemically important credit institutions.
The US sanctions on VEB and Promsvyazbank aim to freeze their assets in the country and will block US businesses from conducting transactions with them.
Separately, European Commission President Ursula von der Leyen said the EU would ban trade between the bloc and the two separatist-held regions of Donetsk and Luhansk, a move the bloc also made when Russia annexed Crimea in 2014.
What about sovereign debt?
The US, the EU and Japan have all taken steps to restrict Russia's capacity to borrow on international markets.
"We've cut off Russia's government from Western financing," Biden said. "It can no longer raise money from the West and cannot trade in its new debt on our markets or European markets either."
Von der Leyen said: "We are limiting the Russian government's ability to raise capital on the EU's financial markets. We will make it as difficult as possible for the Kremlin to pursue its aggressive actions." Japanese Prime Minister Fumio Kishida also prohibited the issuance of Russian bonds in Japan.
US investors have been banned from buying new dollar-denominated Russia debt since the Crimean annexation in 2014, while US banks have not been allowed to take part in Russia's primary market for non-rouble sovereign bonds and rouble-denominated bonds since 2019 and 2021 respectively.
The US Treasury said the new measures would prohibit US banks taking part in Russia's secondary market for bonds issued after March 1.
"The message from the US is clear, we don't want you to hold Russian assets," Tim Ash, senior EM sovereign strategist at BlueBay Asset Management, told Reuters. "'Get out now' is the clear-cut message."
How effective will the sanctions be?
The sanctions are likely to have little more than a minimal effect, a view enforced by the fact that the US and the EU have held back from using far stronger measures for now.
Russia's big state-run banks have not been included and almost all the banks hit are relatively small lenders. Shares in Russia's biggest banks, Sberbank and VTB soared after they were let off with no sanctions.
Sanctions imposed after the annexation of Crimea were more significant, and many of those remain in place.
In terms of the efforts to hit Russia's sovereign options, experts say Russia is in a far different place to how it was in 2014. The country has pivoted away from US dollars, and from foreign sources of revenue as a whole. The foreign share of ruble debt holdings, known as OFZ, is just 18% according to analysts at VTB.
The new US measures simply extend restrictions which have been in place for years now. Russia has hard currency reserves of more than $600 billion (€529 billion) and Elina Ribakova, deputy chief economist at the Institute of International Finance, told Reuters the sovereign debt sanctions would have very little effect.
"Russia's fiscal position is in surplus and Russian authorities are overfunding," she said.
What other sanctions are to be expected?
Western allies have more severe options still available, which they may use in responsce to Russia's overnight announcement of a military operation that Ukraine has called a "full-scale invasion."
One major option left is to target Russia's big state-run banks, which are crucial to the financing of the country's energy sector. "If this invasion proceeds, we are ready to press a button to take further action on the very largest Russian financial institutions, including Sberbank and VTB, which collectively hold almost $750 billion in assets," an unnamed US official told the Financial Times.
Perhaps the biggest option of all would be to cut Russia off from SWIFT, the main international payments network. In anticipation of a possible ban, Russia has developed an alternative system called SPFS, which handles around 20% of its domestic payments.
Other sanction options include export controls which would target Russia's capacity to obtain key technology, such as semiconductor chips.
But the most severe options come with the biggest risks.
Hitting the country's biggest banks could lead to energy supplies being cut off from Europe, one of the main retaliation options available to Russia. Following the German move to suspend the Nord Stream 2 deal on Tuesday, former Russian President Dmitry Medvedev tweeted: "Welcome to the brave new world where Europeans are very soon going to pay €2.000 for 1.000 cubic meters of natural gas!"
Cutting off access to SWIFT also carries risks. While Russian banks would be hit, many European creditors would also be at risk of not getting owed money back. European banks in Austria, France and Italy are among those most exposed to Russia.
"(In the case of further Russian military action) we are likely to see some of the really qualitatively more devastating measures than in the past," Samuel Charap, a political scientist at the RAND Corporation, told Reuters, before Russia's overnight attack.
Edited by: Hardy Graupner