Explained: What are sanctions and how could Western countries target Russia

The United States and its allies are preparing sanctions against Russia after Russian President Vladimir Putin on Monday recognised Donetsk and Luhansk - the two rebel regions in Ukraine - as independent entities. 

Putin also ordered troops to these regions, accelerating fear of an armed invasion of Ukraine that could trigger a much larger military conflict and force deployment of European and American forces.

Russia, which has been under Western sanctions since its 2014 annexation of Crimea from Ukraine, is likely to face more stringent punitive measures this time; the United States has already announced some, and foreign ministers of EU nations are expected to add to that after a meeting today.

Europe's response will be focused on Russia's recognition of Donetsk and Luhansk, the bloc's foreign policy chief, Josep Borrell, was quoted by news agency Associated Press. 

The United Kingdom has said it will introduce "immediate" sanctions; Prime Minister Boris Johnson has warned that Vladimir Putin is bent on "a full-scale invasion of Ukraine". 

France and Italy have already signalled their intention to sanction Russia; Italy Prime Minister Mario Draghi called Russia's actions "an unacceptable violation of Ukraine's democratic sovereignty".

Ukraine has called for severe sanctions against Russia, and President Volodymyr Zelenskiy said his country may break off diplomatic relations with Moscow.

India has called on all concerned parties to exercise "utmost restraint" and work out a "mutually amicable solution" to the crisis.

What is a 'sanction'?

Sanctions are economic and financial punishments enforced by a country (or a group of countries) against another nation. For example, in this case it could mean the United States bans the import of certain goods from Russia. 

Sanctions can have very serious consequences for receiving countries, and the hope is that the population in these areas become agitated enough to demand change from their governments.

How can Western nations sanction Russia?

These can be levied against both individuals and institutions; some of the smaller Russian state-owned banks are already under sanctions. 

According to news agency Reuters, the US plans to target relationships between certain Russian and American banks, and President Joe Biden has already issued an order prohibiting investment in and financing to the separatist regions.

The UK has threatened to block Russian companies from US dollars and British pounds, thereby preventing them from raising capital in London, Europe's financial centre for such transactions

Sanctions can also be imposed on individuals via asset freezes and travel bans. 

The US, the EU and the UK already have sanctions in place against Russian individuals; the EU on Monday sanctioned five people over a Russian election in annexed Crimea in September last year.

A bill unveiled by Democrats in the US Senate aims for sanctions against top Russian government and military officials, including Putin. 

Sanctioning individuals, as a rule, is generally easier to decide and implement. Sanctions against financial institutions and entire sectors - like banking or defence - will take longer.

The US and the EU already have sanctions in place on Russia's energy and defence sectors, with state-owned gas company Gazprom, its oil arm Gazpromneft, and oil producers Lukoil, Rosneft and Surgutneftegaz facing curbs on exports, imports, and debt-raising. 

Germany has said it will halt the Nord Stream 2 gas pipeline from Russia. The pipeline brings natural gas and has been singled out as increasing Europe's reliance on Russian energy supplies.

Sanctions against Russia could also include disconnecting Russia from SWIFT - the global messaging network used by banks and other financial institutions to send and receive critical information.

In 2012 SWIFT disconnected Iranian banks and the country lost 50 per cent of its oil export revenues and 30 per cent of its foreign trade, the Carnegie Moscow Center think tank said.

As with all financial sanctions, though, this cuts both ways. The US and Germany stand to lose the most from such a move, as their banks frequently use SWIFT with Russian banks, which is why German banks have insisted any banking sanctions are "precise and unambiguous".

What is Russia's response to the sanctions?

Russian Foreign Minister Sergei Lavrov has brushed off the threat of sanctions, saying, "We're used to it. We know that sanctions will be imposed anyway, in any case. With or without reason."

"Our European, American, British colleagues will not stop and will not calm down until they have exhausted all their possibilities for the so-called ‘punishment of Russia’. They are already threatening us with all manner of sanctions or, as they say now, 'the mother of all sanctions'," he said.

With input from AP, Reuters