European Union risks being more isolated to face Russia from Vladimir Putin, but still has some trumps in the mango
The European Union (EU) faces an unprecedented dilemma. The United States (USA) opened the door to the possibility of doing what until a few months would be unthinkable, raising the possibility of ending economic sanctions against Russia. French President Emmanuel Macron and Ursula von der Leyen were quick to say that the European bloc will only do so if Moscow removes the troops from Ukraine. But with limited tools and more confrontational US, the EU is in a vulnerable position and experts warn that the block, already weakened by internal divisions and economic challenges, may be walking to dangerous isolation, without the capacity to impose its will in a global scenario dominated by confrontation powers.
“The European Union has no strength or muscle to exert any pressure on Russia. On the contrary, we are increasingly weak and increasingly a more vulnerable and isolated block, without capacity to exercise pressure on Russia,” says economist João Rodrigues dos Santos, a professor at European University. For the expert, the logic of confrontation with Moscow, at a time when the US seem willing to normalize relations with Russia, is “irrational and unrealistic.”
Currently, the European Union is preparing its 17th Package of Sanctions against Russia, at a time when Moscow remains at the top of the list of the world’s most sanctioned countries. In all, USA, EU, UK, Canada and Switzerland applied 21,692 sanctions against individuals, entities, vessels and Russian aircraft. Donald Trump has already shown being willing to relieve some of these restrictions and Kremlin as well. Vladimir Putin even admitted to let the EU sit on the negotiating table in exchange for Russian agricultural bank to turn on to the SWIFT system-something promptly rejected by several European leaders.
But this system, which allows the exchange of bank information and bank transfers between institutions, is headquartered in Belgium and, by extension, is subject to EU regulations. Russia’s restriction from using this mechanism has allowed, among other things, to block Russia’s access to more than 274 billion euros of assets from its central bank that are mostly deposited in Europe. Even if the US decides to raise sanctions against Russia, Kremlin hardly will have access to these funds and the SWIFT system.
“SWIFT is a messaging system that gives you orders between banks. But it’s just the messaging system, it’s not the transfers themselves. When you want to make a transfer, banks communicate with each other through the Swift system, which is based on Belgium,” explains Ricardo Cabral, professor at Iseg.
Although Europe has a word to say regarding the use of the SWIFT system, US dollar transactions control gives the US an overwhelming advantage. This capacity allows Washington, DC having almost total control over dollar monetary transactions and could completely “block Swift over the dollar,” which could completely undermine the existence of SWIFT. “That is, any transfer in dollars is the United States that control,” adds Ricardo Cabral.
Russia, in turn, did not get arms crossed. Since the 2014 sanctions, after the annexation of Crimea, the country has developed alternatives to SWIFT, SPFS. The system allows the exchange of messages in banks within Russia and, since 2022, has expanded its operations to more than 70 organizations in 12 countries. Although the scale of these mechanisms is much lower than SWIFT, which connects more than 11,000 institutions in 200 countries, SPFs has allowed Russia to “survive” to sanctions, albeit with limitations.
For João Rodrigues dos Santos the creation of alternatives by Russia raises serious questions about the effectiveness of European sanctions in a scenario where the US decides to raise sanctions. “Sanctions without US power does not have the same impact, we have no ability to apply sanctions with the same force without the US. Russia today has a set of alternatives,” he warns.
The insistence of the EU in maintaining sanctions in isolation against Russia may have a high price. Since 2022, the European bloc has decided to strongly reduce dependence on Russian natural resources, forcing 27 to look for alternatives in other more expensive suppliers. The scenario led growth to sink in the EU and shoot in Russia. According to the International Monetary Fund, Russian GDP increased 3.6% in 2023 and 2024, well above EU growth, which was 0.6% and 1.1% in the same years.
The European Union responded with an economic plan of 800 billion to remedy Europe. João Rodrigues dos Santos warns that the increase in defense expenses, in a context of limited resources, may aggravate the block’s economic crisis. This is because increasing the defense budget, although it can be seen as necessary by some, can divert crucial resources from other areas, such as health, education and infrastructure without necessarily adding much to the real economy.
“With part of the EU GDP’s allocated to defense, the block is in danger of getting even more fragile, even in the competitiveness of its economy. The resources do not stretch. When we apply resources to one sector, we stop having resources to others,” explains João Rodrigues dos Santos, adding that a “war economy can generate jobs, but leaves no scramble in the economy.”
The expert argues that he is becoming increasingly “difficult to understand” the will of the European Union to “continue an iron arm” with Russia, at a time when “productivity is falling” and there is a “completely confranging demographic dynamism.” Especially if the European position becomes antagonistic to the American.
“There are many banks and many European companies that have dollars assets and therefore they cannot have a war with the United States through SWIFT. If the United States retaliated and climbing, the impact could be very serious for the European financial system,” warns Ricardo Cabral, who underlines that, in the short and medium term, the EU has no viable alternatives to SWIFT, which limits its ability to act independently.
In a world of rapid transformation, the European Union faces the risk of becoming irrelevant. The possibility of the United States relieving sanctions against Russia, without the agreement of Europe, exposes the weaknesses of the bloc. Dependence on the American financial system, internal divisions and economic challenges, such as productivity fall and demographic aging, limit the EU’s ability to act in an autonomous and effective manner. Without a clear strategy, no resources to compete with global powers and without the cohesion needed to maintain pressure on Russia, Europe may be walking to dangerous isolation. “Today we are one of the weaker global blocks on the global scale. It is difficult to understand this iron arm remains,” laments João Rodrigues dos Santos.
