Some of Ukraine’s key allies, including the US, are considering a complete ban on most exports to Russia, which could seriously increase economic pressure on Vladimir Putin.

According to people familiar with the matter, G-7 officials are discussing the idea ahead of a leaders’ summit in Japan in May, and the goal would be to include European Union member states. The proposal is under discussion and may be changed at any time.

The approach being discussed by the diplomatic representatives cancels the current sanctions regime, under which any export is allowed, as long as it is not subject to sanctions.

Bloomberg sources said if G-7 leaders approve the move at the summit, food and medicine could be released.

Problems

However, there are problems with the implementation of this step. For the new criteria to take effect in the EU, they must be accepted by all members, and this will cause a difficult debate, given the possible backlash from companies that still export goods to Russia.

At the same time, there is a risk of retribution from Moscow. If a near-complete export embargo is implemented, most of the remaining trade flows from these countries with Russia will be destroyed. A spokesman for the US National Security Council declined to comment on the prospect of such a move.

So far, sanctions have nearly halved the value of EU and G7 exports to Russia, with restrictions covering everything from electronics to luxury goods. But it still allows $66 billion worth of goods to flow out of Europe, the US, Canada and Japan, according to the Geneva-based Trade Data Monitor.

G7 members are concerned that this is too beneficial for Putin’s wartime economy, especially as Moscow finds ways to circumvent sanctions for importing goods through third countries.

The G7 and the EU have imposed several rounds of sanctions, some of which included a grace period before they take effect.

Russia has responded to the sanctions by imposing its own export bans and periodically cutting off energy supplies to Europe.

Moscow has stopped publishing import data, but several international observers and governments are monitoring their exports to Russia and customs data. According to Trade Data Monitor, Germany, Italy and Poland remain among the top three European exporters of goods to Russia. In G-7, non-pharmaceutical and non-agricultural products that may be most affected include cars, chocolate, beer, shoes, flowers, and cosmetics.

Even with existing barriers, Russia has been able to import some components banned by the US and Europe through third countries. This forces the G7 and the EU to control the flow of goods, especially so-called “dual-use” goods that can serve both military and civilian purposes.

Source: Bloomberg.