The Hammer Behind the Curtain: The Geopolitical and Economic Fallout of US Secondary Sanctions Against Russia

As the war in Ukraine enters its fourth year and the direct costs to Western treasuries and arsenals mount, policymakers in Washington are beginning to explore new instruments of economic warfare that might erode Russia’s ability to sustain her aggression without further burdening NATO’s own economies. Amongst the most potent — and controversial — tools now under serious discussion is the imposition of secondary sanctions: financial penalties levied not just on Russia herself and upon Russian entities, but on third countries and foreign companies that continue to do business with her. Spearheaded by Republican Senator Lindsey Graham and enjoying growing bipartisan support (allegedly now up to 80 Senators out of 100), this policy would replicate the model used by the United States to isolate Iran in the 2010s — with potentially far more explosive consequences.

If enacted and implemented forcefully, such secondary sanctions could, within a year, begin to cripple key sectors of the Russian economy by cutting her off from essential imports, capital and financial services. But they would also trigger far-reaching geopolitical realignments, economic distortions, and legal challenges across the global trading system. This is economic statecraft at its most imperial: coercion by exclusion, backed by the overwhelming weight of the US dollar and America’s dominance over global banking infrastructure.

What Are Secondary Sanctions?

Unlike primary sanctions — which prohibit American companies and citizens from transacting with blacklisted entities — secondary sanctions threaten to punish foreign firms or governments that do business with sanctioned actors. For example, a Turkish or Indian shipping firm that continues to carry Russian oil, or a Chinese manufacturer supplying dual-use goods to the Russian military, could be cut off from the US financial system, fined billions of dollars, or barred from dollar-denominated transactions.

The United States has successfully deployed such tools in the past, most notably against Iran, Venezuela and North Korea. Their effectiveness depends not on moral consensus, but on coercive reach: even Chinese banks, European insurers and Gulf logistics firms rarely wish to lose access to New York clearing houses or SWIFT-linked dollar flows.

How Secondary Sanctions Would Cripple the Russian Economy

Senator Graham’s proposed framework, still under discussion in Senate committees, would target four principal areas:

1. Oil exports — any firm or vessel involved in the transport or insurance of Russian oil above the G7 price cap would be sanctioned.

   
   

2. Dual-use and military technology — any company exporting electronics, chips, drones, or precision machinery that ends up in Russian military equipment would be sanctioned.

   
   

3. Financial enablers — banks, currency exchanges, and digital platforms that facilitate payment for sanctioned Russian goods are sanctioned.

   
   

4. Critical imports — suppliers of key components to Russia’s civilian industrial base, including aviation, shipping, telecommunications, and heavy machinery are again sanctioned.

The Russian economy remains surprisingly dependent on foreign inputs, even after years of import substitution. Chips from Taiwan, machine tools from Germany, industrial chemicals from China and cars from Korea still underpin swathes of Russia’s economic activity. If third-party suppliers are forced to choose between the Russian market and access to the US economy, most will quietly comply with Washington’s demands.

The time scale of economic degradation would depend on enforcement. If implemented forcefully and comprehensively — as in the Iran sanctions model — Russian GDP could shrink by 10–15% within 12–18 months. A severe downturn in industrial output, a collapse of consumer imports, and a downward spiral in the ruble’s value would likely follow. Black markets would emerge, and Russia’s military would face widening shortages of everything from ball bearings to optics.

Global Economic Side Effects

However such a policy would not come without costs or controversy. The ripple effects would be felt worldwide:

• China would face direct exposure, as many of her companies currently trade freely with Russia. While state-owned giants may comply to protect their global interests, mid-sized exporters and grey-market networks would likely test the limits of enforcement, risking diplomatic confrontation.

  
  

• India, which has dramatically increased her imports of discounted Russian oil, may refuse to curtail her energy ties, framing them as essential to development. Sanctioning Indian firms would fracture US–India relations and push Delhi closer to strategic neutrality.

  
  

• Türkiye, already under pressure from NATO over her ambiguous role in the conflict, could become a major battleground. Turkish banks, insurers, and shipping firms are deeply entangled with Russia, especially via the Black Sea.

  
  

• The Gulf States, particularly the UAE, have become hubs for Russian financial flows. Emirati institutions might quietly comply but would resist overt political pressure.

  
  

• The European Union, although broadly aligned with the US, might object to extraterritorial enforcement of American laws on European companies. While many EU firms have already exited Russia, new secondary sanctions could spark transatlantic trade frictions.

In short, such sanctions would challenge the very architecture of globalisation. The dollar’s role as the world’s reserve currency would come under pressure, as sanctioned entities sought alternative systems, including China’s Cross-Border Interbank Payment System (CIPS), gold settlements, or cryptocurrency-based networks.

Geopolitical Reactions: A World Divided

The geopolitical fallout could be dramatic. Nations already sceptical of US hegemony — from Brazil to South Africa to Indonesia — may accuse Washington of economic imperialism. Moscow would paint the sanctions as an act of war, deepening her anti-Western narrative and accelerating her turn towards the Global South.

But not all responses would be confrontational. Many middle powers — particularly in East Asia, Latin America, and Eastern Europe — would quietly comply. Just as they did under Iran sanctions, firms and states would conduct cost-benefit calculations and adjust their exposure to Russia accordingly. The practical result would be increasing isolation of Russia from the high-value segments of the global economy, even as she trades freely with rogue and marginal partners.

Crucially, Russia’s elite would be increasingly squeezed. Their offshore assets, travel, and dollar-based commerce — already disrupted — would become nearly impossible. This could heighten internal tensions between military hardliners, technocratic reformers, and oligarchic clans.

Legal and Normative Challenges

The use of secondary sanctions raises serious normative questions. Critics argue that such measures constitute the extraterritorial imposition of US law and undermine the multilateral rules-based system. The World Trade Organization (WTO) may face renewed legal challenges, although it is unlikely to intervene effectively against Washington.

Some European jurists (not this one) warn that such sanctions blur the lines between national sovereignty and global financial coercion. Others counter that, in a world of systemic conflict, traditional legal frameworks must bend to strategic necessity. The war has to be stopped, and that involves relentless economic pressure upon Moscow.

A Weapon of Final Resort — or of Victory?

Secondary sanctions are not a surgical instrument; they are a hammer. But in a conflict where battlefield victory remains elusive and diplomatic settlement impossible given Russia's maximalist stance on negotiations, such a hammer may offer the West its best chance to force Russia to the table short of direct military confrontation with Russia.

Whether they break Russia’s war machine — or break the cohesion of the global economic order — or both — depends on how they are wielded. Done carelessly, they could embitter allies and push adversaries into formation of rival economic blocs in an eery replica of George Orwell's description of the wars between groups of states in his landmark novel Nineteen Eighty-Four. Done intelligently, they could tilt the balance of power in favour of Western liberalism and totalitarianism without firing a shot.

One thing is clear: if Senator Graham’s vision becomes law, the war in Ukraine will no longer be just a European tragedy. It will be a global test of how far American economic power can reach — and whether it can, in the end, bring peace through pressure rather than fighting.