How Sanctions Against Russia Taught the West Dynamic Financial Blockades
Russia’s full-scale invasion of Ukraine forced the West to rethink sanctions—not as static penalties, but as agile financial weapons. From real-time banking surveillance to oil price caps and secondary sanctions, a new era of dynamic economic warfare has begun.
Western Countries are Implementing a New Level of Dynamic Banking Monitoring
Since the start of Russia's full-scale aggression, the West has imposed unprecedented financial restrictions on the Russian banking system. In the first days of the invasion alone, sanctions imposed by the US and its allies covered about 80% of the Russian banking sector. The largest banks were disconnected from the dollar system and later from SWIFT, which effectively isolated Russia from the global financial infrastructure.
A critical blow was the freezing of approximately €300 billion in gold and foreign exchange reserves of the Central Bank of the Russian Federation in Western jurisdictions — a step that had never before been applied to an economy of this size. The extraordinary scale of these sanctions required dynamic monitoring of banking transactions. The G7 countries effectively put financial institutions on the “front line” in detecting attempts to circumvent sanctions.
On the one hand, the dominance of the dollar and the euro in international settlements allows Western regulators to track payments even for transactions that formally take place outside the West. On the other hand, banks are required to strengthen compliance: to check customers more thoroughly (KYC), monitor suspicious transfers, and identify schemes that could indirectly finance the Russian military machine.
In the US, at the end of 2023, an executive order (EO 14114) was even issued, providing for secondary sanctions against any foreign financial institution exposed in significant transactions for the Russian defense sector. In other words, the West has moved to actively block Russian finances in real time: from tracking transactions to immediately closing any loopholes that are found. This flexible approach has become the new norm in sanctions policy.
The Price Cap System has Become an Unprecedented Tool
Opposition to Russia's energy expansion gave rise to a unique sanctions mechanism: a price cap on oil. At the end of 2022, the Group of Seven (G7) and the EU introduced a price cap on Russian oil for the first time in history, setting a maximum price of $60 per barrel. Since February 2023, separate caps have been in place for petroleum products: high-grade (diesel, etc.) – $100, low-grade – $45 per barrel. This scheme made it possible to continue supplying Russian oil to world markets (avoiding a shortage), but at the same time significantly reduced the Kremlin's revenues.
During the first year of the restrictions, Russia was forced to sell Urals crude oil at a large discount – on average $50-55, which is significantly less than world prices. Export volumes remained relatively stable, but profits fell, confirming the success of the dual goal of maintaining supplies while cutting the aggressor's revenues.
However, over time, the effectiveness of the price cap weakened due to Russia's adaptation. Moscow created a “shadow fleet” of tankers without Western insurance and changed its logistics to circumvent financial restrictions. In response, the allies took dynamic countermeasures. First, they began to regularly review the ceiling level: in June 2025, the EU proposed lowering the oil limit to $45 to further reduce Russia's excess profits. Second, massive sanctions against logistics began: in the 17th EU package alone, 200 tankers from the shadow fleet with opaque owners were sanctioned. Bans on insurance and financing of shipments that violate price restrictions were also introduced.
As a result, after the blow to the shadow fleet, exports from Russian ports on the Black and Baltic Seas fell by 30% in just one week. A precedent has been set: the international coalition has demonstrated that it can flexibly regulate prices for critical resources of the aggressor, introducing a new dimension to sanctions policy. This paves the way for the use of similar “ceilings” in future crises when it is necessary to hit the aggressor's economy without destabilizing global markets.
“SPF” vs. Traditional Restrictions: a Creative Approach to Sanctions
Learning from the lessons of the Russian war, the West has significantly diversified its sanctions toolkit, moving away from template bans to specific sanction formulas (SPF). Traditional sanctions are mostly static bans: blacklists of individuals, embargoes on certain goods, and the disconnection of individual banks. In contrast, the new “formulas” provide for flexible, conditional mechanisms that adapt to the behavior of the target.
An example is the price cap mentioned above: essentially, a sanction with the formula “allowed, but if the price is ≤ X.” Another example is secondary sanctions, which are conditionally activated against third parties if they help circumvent the main restrictions. Europe previously avoided this approach, but in 2023, Ukraine directly proposed that the EU impose secondary sanctions on key buyers of Russian oil — India and China — which would be an unprecedented step for Brussels. Currently, the EU has only imposed selective restrictions on individual Chinese and Turkish companies for cooperating with Russia, but the very fact of such a move signals a shift from a cautious position to a more aggressive sanctions tactic.
In addition, the sanctions policy has become more dynamic and comprehensive. Previously, new sanctions could take years to adopt, but now, after two years of war, the EU has already agreed on 17–18 packages with new measures. Creative solutions are being considered to circumvent internal barriers (such as the veto power of individual EU members), including trade tariffs and financial restrictions outside the scope of traditional sanctions. For example, in 2025, special tariffs on Russian goods and capital controls were discussed as backup levers of pressure if Hungary blocked the extension of sanctions under the usual procedure. Such measures can be adopted by a majority vote, bypassing unanimity.
At the same time, there are proposals to abandon the principle of unanimity altogether and move to qualified majority voting on sanctions decisions in order to rule out the possibility of blackmail from within. All this shows that the West's sanctions policy is evolving: instead of one-off reactions, it is turning into a flexible system of “economic pressure” capable of quickly adapting to the actions of the aggressor.
Ukrainian Analysts Are an Integral Part of the Sanctions Front
Ukraine has become not only the target but also a co-creator of the West's sanctions strategy. From the first days of the war, Kyiv has been actively sharing intelligence, proposing lists of targets, and new ideas for sanctions. The Yermak-McFaul International Expert Group was created under the Office of the President, bringing together more than 100 experts from different countries. This group prepares detailed plans and roadmaps for sanctions, monitors their implementation, and formulates recommendations for allied governments. Its work is directly used by officials of the sanctions coalition, and the Ukrainian KSE Institute has received a government mandate to monitor the effectiveness of restrictions and propose new ones.
The concrete results of this cooperation are tangible. Ukrainian officials regularly seek to have the necessary individuals included in sanctions lists. For example, before the 11th package of sanctions, Ukraine provided its partners with a list of Russian propagandists and artists who promoted the war and succeeded in having them blocked. Among others, even the mother of Kadyrov's dictator, who financed the forced “re-education” of kidnapped Ukrainian children, fell under European sanctions. Such steps are largely the result of Ukrainian advocacy.
In addition to personal sanctions, Kyiv is also promoting systemic initiatives. In May 2025, Ukraine prepared a whole “White Paper” on sanctions policy for the EU, calling on Europe to take a tougher and more independent stance. Among the proposals are the confiscation of frozen Russian assets and their transfer to Ukraine, the introduction of secondary sanctions against foreign companies that help Russia circumvent the embargo, and the reform of the EU's decision-making procedure (transition to majority voting).
In fact, Ukraine is the driving force behind the constant tightening of sanctions. Ukrainian experts are also the first to identify new circumvention schemes: for example, they found that up to 70% of foreign components in Russian drones are supplied by China. This gave grounds to demand that partners close such supply channels. Thus, interaction with Ukrainian analytical teams allows the West to respond quickly to challenges and keep up with the Kremlin's tactics.
The Next Level: Blockade Tools for China and Iran
The experience gained in the financial war with Russia is becoming a template for Western actions against other threatening regimes, primarily China and Iran. The Kremlin's aggression has accelerated the consolidation of the sanctions coalition, and now this mechanism can be applied on a broader scale. In particular, the West has already begun to send warning signals to Beijing about the consequences of supporting Russia.
In 2023–24, the US and the EU imposed sanctions for the first time against a number of Chinese technology companies exposed for supplying microelectronics for Russian weapons. Under the 14th package of EU sanctions (June 2024), six companies from mainland China and 13 from Hong Kong involved in supporting the Russian military-industrial complex were subject to restrictions. This is a radical shift, as Brussels had previously avoided touching Chinese interests. Now, however, Europe is gradually moving closer to the US approach, demonstrating its willingness to play hardball even with the world's second largest economy.
Analysts note that the sanctions against Russia — the most comprehensive in the last 70 years — have become a kind of dress rehearsal for a potential confrontation with China. Of course, sanctions pressure on Beijing would be much more difficult due to the scale of its economy (China's GDP is 10 times larger than Russia's) and its deep integration into world trade. However, the West now has proven methods: disconnecting banks from SWIFT, freezing reserves, embargoes on critical technologies, secondary sanctions – all of which have proven effective in the Russian case.
It is no coincidence that the Chinese leadership is closely studying Russia's experience in circumventing sanctions and is taking measures just in case (building up internal payment systems, creating alternatives to Western ship insurance, etc.). For the West, the main conclusion is the potential power of preventive sanctions. If in 2021-22 it was not possible to restrain Putin with threats of sanctions (because he did not believe in their scale), now the signal to Beijing is clear: in the event of aggression against Taiwan or direct military intervention in support of the Russian Federation, the isolation of the Chinese economy could be close to total.
Scenarios are already being discussed for disconnecting large Chinese banks from the dollar or freezing their assets in a critical situation. As for Iran, the new arsenal of sanctions is being used to the fullest. Tehran, by providing Moscow with kamikaze drones and other weapons, has exposed itself to additional Western sanctions. In 2022–23, the EU imposed three separate rounds of sanctions specifically for the supply of Iranian drones to Russia. And in July 2023, the European Union created a special sanctions regime against Iran for its military support of Russian aggression. It already includes 20 Iranian officials and 20 organizations — manufacturers and suppliers of drones and missiles, transporters, even units of the IRGC Navy and Iran's national airlines. The EU has imposed a ban on transactions with ports and shipping locks used to transfer Iranian drones to Russia.
In fact, a model has been developed for the swift punishment of third countries that assist the aggressor: similar measures have been taken in cooperation with the US against North Korean and Syrian entities involved in circumventing sanctions. Conclusion: the war in Ukraine has changed the West's approach to sanctions, making them a “living” mechanism of financial blockade. From now on, sanctions are not just a political gesture, but a flexible tool for the long-term exhaustion of the aggressor: with constant monitoring, adjustment, and expansion of influence.
The Ukrainian case has taught the democratic world that economic warfare can be almost as active as warfare on the battlefield. And this lesson is already being taken into account in preparation for potential challenges from China, Iran, or other states that want to challenge the international legal order. The West has shown that it is capable of creating a dynamic financial blockade, and this strategy will remain in the arsenal of deterrence for many years to come.
Bohdan Popov, head of digital at the United Ukraine Think Tank, communications specialist, and public figure