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Two people holding a Ukrainian flag protest the Russian attack on Ukraine outside of the Russian Embassy in London, the UK, on Feb. 23. (AP/Yonhap News)

US President Joe Biden is set to announce full-scale sanctions on Russia.

After Russian President Vladimir Putin recognized pro-Russian republics in eastern Ukraine as states and announced plans to send in troops on Monday, Biden responded by imposing a “first tranche” of sanctions on two Russian banks.

Now that Russia has launched its attack, the US president finds himself having to produce the “severe sanctions” that he had been pledging in the past. But both the US and Europe find themselves having to wrestle with questions amid doubts over whether sanctions will prove as effective as anticipated.

The chief basis for the skepticism is the prediction that sanctions will have only a limited impact on the Russian economy.

The US administration has claimed that severe sanctions would lead to Russia experiencing an explosive increase in prices and a sharp decline in share values, which would undermine Putin’s support base. A senior US official predicted last month that inflation rates in excess of 10% would cause difficulties for Russians.

Some of the intensive sanctions that the US is considering include a ban on US and other financial institutions having dealings with large Russian banks, along with restrictions on exports of semiconductors, which some have described as the “rice” — or staple — of contemporary industry.

But with the Russian economy already only weakly linked to the West, the effect of sanctions could be limited. Indeed, it has only grown more self-sufficient under the sanctions imposed by the West since its annexation of the Crimean Peninsula in March 2014. Most crucially, it has become more self-sustaining in its dependence on domestic production and consumption.

Announcing the sanctions in remarks on Tuesday, Biden said that the US had “cut off Russia’s government from Western financing.” But this too appears unlikely to have an enormous impact on Russia.

Russia has a low level of national debt — amounting to less than 20% of gross domestic product, or GDP. In many Western countries, that rate is around 100%.

The Guardian newspaper noted that with only 10% of Russia’s national debt overseas, it may not experience any major issues if it is booted out of the international bond market.

Further insulating it from the blow are the massive foreign reserve holdings it has built up from petroleum, natural gas and other exports. These total some US$631 billion, ranking it fourth in the world in their scale.

Responding to the US sanctions, Putin recently stressed that the Russian economy had vastly improved its self-sufficiency.

“We will need to work on increasing our economic sovereignty,” he said.

Due to the reciprocal nature of economies, countries that impose sanctions also suffer the consequences. This is known as the so-called boomerang risk.

If the escalating conflict translates into a major rise in prices of petroleum and natural gas — Russia being a major exporter of both — it could result in growing disgruntlement among consumers in the US and around the world, who are already grappling with high petroleum prices.

Biden stressed that his administration was “using every tool at our disposal to protect American businesses and consumers from rising prices at the pump.”

“[D]efending freedom will have costs for us as well, here at home,” he added.

The situation is even worse for Europe, which relies heavily on Russian-produced natural gas. This may explain why the topic of halting imports of Russian petroleum and natural gas — which was being broached as recently as last month — has not been discussed there as a serious consideration recently.

Russia also has an ally in China. Putin, who visited China during the recent Winter Olympics in Beijing, announced the signing of a long-term contract for a substantial increase in natural gas supplies to China. Even if its trade with Europe is restricted, Russia appears likely to make up for any losses due to sanctions through its dealings with China, which is not far away from becoming the world’s largest economy.

In a statement responding to the sanctions announcements by the US and others, the Russian Foreign Ministry said, “Russia has proven its ability to minimise the inflicted damage regardless of the costs that come with the sanctions.”

“Make no mistake, we will respond strongly to these sanctions,” it also said, threatening economic retaliation targeting sensitive areas for the US.

The message read as a signal of Russia’s confidence that sanctions will not be enough to sway it.

By Lee Bon-young, Washington correspondent

Please direct questions or comments to [english@hani.co.kr]