Updated Feb 28, 2022 - Economy

The emerging nuclear threat

Illustration of a nuclear warning as a clock face

Illustration: Annelise Capossela/Axios

Up until this weekend, Russia's invasion of Ukraine looked very old-fashioned: Columns of tanks, prisoners of war, bombed buildings. Now, however, Russia and the West have both wheeled out their nuclear options — one literal, the other financial — although neither has actually been used.

Why it matters: The stakes could now hardly be higher. This isn't just about Ukraine any more; it has turned into a full-blown confrontation between nuclear powers. If the conflict continues to escalate as quickly as it has in recent days, the unthinkable could become reality.

How it works: Cutting Russia off from the international financial system has been referred to in recent days as "the nuclear option." Some of that has already happened, and the West has committed to even more:

  • Russia's largest banks are now unable to operate in the dollar-based financial system, following actions taken by the Treasury Department on Thursday.
  • Russian banks' ability to easily transact in dollars and euros will be severely hampered when they get removed from SWIFT, the international financial-messaging system that undergirds nearly all international money transfers.
  • The Russian central bank will be unable to support the ruble if its dollar and euro accounts are frozen.

What we're not sanctioning: The West is still allowing Russian energy exports. "If Russia stops selling its oil and gas, that would be the end of Russia as we know it,”says Edward Fishman, former Russia and Europe sanctions lead in the Obama administration's State Department.

  • Russia will still be allowed to buy food, medical necessities, and the like. "Sanctions aren't going to kill anyone," says Fishman.

The West has promised to impose "the financial equivalent of a nuclear strike," says former George Bush speechwriter David Frum.

  • Yes, but: That hasn't happened yet. Details of the new sanctions have not yet been released, and it's not clear what will actually be in place when markets open on Monday morning.

The other side: Putin's response to the sanctions announcement — and to what he called “aggressive statements” from the West — was to put his nuclear forces into a “special regime of combat duty."

  • The clear message: He is threatening a nuclear strike of his own, without specifying when or where such a strike might take place.

The bottom line: The bear has been poked, and the stakes are now existentially high.

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