In response to Russia invading Ukraine, the US and the European Union (EU) have imposed a slew of economic sanctions on Russia with a view to cripple its economy, banking institutions and its access to technology.

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The US announced sanctions on some individuals, and on some Russian banks, while the EU has said that it will disconnect an unnamed list of Russian banks from the SWIFT payment system. Also, both the US and the EU have said that they will prevent Russia from accessing its reserves.

To understand how this could impact India, CNBC-TV18 spoke to Venkat Nageswar Chalasani, Former Deputy Managing Director and GE, IBG, State Bank of India, and Prof Rakesh Mohan Joshi, Dean, Indian Institute of Foreign Trade.

Chalasani believes Indian trade will not be impacted from restrictions. He pointed out that such restrictions have not been imposed for the first time and that Iran was banned from the SWIFT too.

"This is not for the first time that this is happening. Iran has been banned from sending the SWIFT messages. We have also seen that Iran is not allowed to do the trade transactions as well. But to my mind, it is difficult, but it is not insurmountable for the Indian trade to happen," he said.

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Joshi on the other hand is of the view that sanctions placed on Russia are unprecedented. He explained that it is tough for Russia’s central bank to intervene. He added that assets of a central bank have been put on freeze for the first time and so ruble may see a free fall.

"The sanctions, which was placed on Russia yesterday was probably unprecedented in nature. Russia is cut off from the SWIFT network, which is basically the messaging network and the payment network for the financial transactions. Cutting Russia out of the SWIFT network would make it difficult for Russian firms to export and import. So, it is cutting off from the international financial system," he said.

"The basic objective of this is to paralyze the Russian economic system and more than that, it is probably the first time that the assets of a central bank have also been frozen. Within 4-5 days, the ruble has gone from 70 ruble a dollar to 113-114. The ruble going freefall, it will be difficult even for the central bank to intervene," he said.

Also Read: Ukraine-Russia conflict: From sunflower oil to beer, what consumer goods could get costlier

Joshi also added that Russia may see high or hyperinflation because of the currency fluctuation, going ahead.

"So, that is going to put the Russian economy in a very tough situation. The currency fluctuation would also put Russia in high inflation, if not, it is going to be hyperinflation," he added.

Watch the video for the full interview.

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(Edited by : Dipikka Ghosh)

First Published:Feb 28, 2022 1:04 PM IST