What Secondary Sanctions Mean, for Russia and World

As the war in Ukraine drags on, the US and its allies are seeking ways to ratchet up economic pressure on Russian President Vladimir Putin. The hundreds of sanctions imposed so far on Russian industries, companies and individuals by the US, UK and European Union apply only to the extent that sanctioned banks, companies and people fall under the legal jurisdiction of those areas — by holding money in American bank accounts, for instance. But as the Ukrainian government pleaded for more action, Washington began warning that it would for the first time impose so-called secondary sanctions against banks that aid Russia’s war machine. The idea appeals to those who want to close loopholes Russia has been using to continue doing business with the world. But secondary sanctions are also controversial, in part because of what they could mean for US allies who rely on Russia for energy and other resources.

Secondary sanctions target commercial activity involving a party under primary sanctions but occurring outside US legal jurisdiction. The imposition of secondary sanctions is meant to force companies, banks and individuals to make a tough choice: continue doing business with the sanctioned entity or with the US, but not both. Because of the primacy of the dollar as a store of value, most companies prioritize keeping good relations with the US.