EU and Nato member states have warned Russia that it will be hit with a devastating package of sanctions if it invades Ukraine amid a build-up of about 100,000 Russian troops on the border between the two countries.
The EU imposed sanctions on Russia’s energy, banking and defence sectors after it invaded Ukraine and annexed Crimea in 2014. But Moscow remains an important economic partner as the bloc's fifth biggest trade partner.
A senior US official laid out economic sanctions “with massive consequences” that go far beyond the measures implemented in 2014 after Russia invaded Ukraine's Crimea region.
New measures could include restrictions on exports of high-tech US equipment in the artificial intelligence, quantum computing and aerospace sectors, the official said.
Cutting Russia off from these technologies would hit Putin's “strategic ambitions to industrialise his economy quite hard”, the official said.
Long-standing trade ties are dominated by Russian energy exports through pipelines to the European industrial economies. Germany is believed to be resisting behind the scenes any efforts to include the gas sector in a sanctions package, even though new chancellor Olaf Scholz has said Moscow would suffer "high costs" from an invasion.
In particular it is wary of holding up authorisation of the new multi-billion dollar Nord Stream 2 pipeline from Russia with ruling party officials arguing it is a private sector project that is separate from the Ukraine issue.
Russia is the EU's third biggest source of imports after the United States and China. European Commission chief Ursula von der Leyen has noted that the EU is Russia's biggest trade partner and the largest investor in the country.
For its part the UK has urged the EU states to hit the button on sanctions as soon as it is agreed there must be a response. “We have a hard-hitting package of sanctions ready to go and what I think it would be fair to say is we want to see our European friends ready to deploy that package as soon as there should be any incursion at all by Russia into Ukraine,” British Prime Minister Boris Johnson told the UK parliament on Tuesday.
“It is absolutely vital that … the West is united now, because it is our unity now that will be much more effective in deterring any Russian aggression.”
A key measure under consideration is to cut Russia off the SWIFT network that connects the world's banks. It is a measure previously taken against Iran, but not attempted against a major global economy.
About 300 Russian banks and organisations are part of SWIFT, which connects 11,000 institutions across 200 territories.
Removing Russia from the system would hit companies that do business with the country.
While western powers have said they are united on sanctioning Moscow if an invasion happens, concerns are likely to be higher in Europe because if its economic relationship with Russia.
Germany in particular has reportedly voiced concerns about taking such a strong step.
It is worried about the damage to German financial institutions and the European economy if a comprehensive freeze was imposed on Russian assets and transactions with Russia’s biggest banks.
Russia’s gas supply, which accounts for 40 per cent of Europe’s imports for its energy needs. At the height of winter, prices are already high and alternative supplies not readily available on the work market.
A senior US official said on Tuesday that contingency plans were being drawn up to get Europe through the winter in the event Russia moves to squeeze energy supplies.
Mr Johnson alluded to Berlin’s particular concerns on the matter on Tuesday. He described the “extreme delicacy” of Germany's position because of its reliance on Russian gas.
“Germany is absolutely critical for our success in this,” he said. “We've just got to keep the pressure up together.”
He said “one of the big issues that we all face in dealing with Ukraine, in dealing with Russia, is the heavy dependence of our European friends in particular on Russian gas”.
Still, a senior US administration official said that Moscow needed oil and gas revenue as much as Europe relied on Russia for energy supplies. The energy issue should be looked at more as interdependency rather than a pure advantage for Mr Putin, the official said.
Some leaders, including US President Joe Biden, have refused to rule out personal measures against Russian leader Vladimir Putin if war is not averted. Liz Truss, the British foreign secretary, refused to be drawn on the specifics of targeting the Kremlin leader on Wednesday.
Presidential spokesman Dmitry Peskov warnwsthat personal sanctions against Russia's leadership ignores the fact they are legally barred from holding assets, property and bank accounts abroad.
“Politically, it's not painful, it's destructive,” he said.