As the Russian invasion of Ukraine expands, the West has been showing rare unity and is trying to halt Vladimir Putin’s army by imposing economic sanctions against Russia, its president, and his cronies. Thus far, some Russian banks have been excluded from SWIFT, the international money and security transfer system, assets belonging to oligarchs and associates of the Russian leader have been frozen, and European airspace has even been closed to Russian airlines. In Jerusalem, which does not want to anger Putin, officials prefer to watch this international effort from the sidelines. Israel has not imposed any economic sanctions against Putin or any other Russian national and has not adopted the sanctions imposed by other countries.

“In general, Israel does not usually impose legal sanctions after the West,” says attorney Yuval Sasson, a former deputy to the attorney general in the International Department who now heads the compliance and enforcement division at international law firm Meitar. “For example, there are no Israeli sanctions against North Korea, yet the extent of trade between the two countries is negligible to nonexistent. That’s because, in the end, Israel is not disconnected from the world, and our entire banking system is based on the global banking system and trade relations. An Israeli company that violates international sanctions creates tremendous obstacles to its own future development.”

According to Sasson, this is, even more, the case in the banking sector. “At the end of the day, the most effective player in the enforcement of international sanctions is the global banking system. Banks in countries that have not imposed sanctions themselves – for many different reasons – toe the line when it comes to European and American sanctions.”

The willingness of banks and companies to toe the line with international restrictions rescues the Israeli from an uncomfortable dilemma, since, given the existing legislation, it is doubtful that Israel would even be able to freeze the assets of Putin’s associates. The law, it turns out, allows authorities only to impose such sanctions in cases of terror funding or in the context of the campaign against the Iranian nuclear program. So, while the U.S. administration can impose heavy fines on American companies doing business with the Russian leader’s associates, Israel has to rely on market forces. And it is precisely on that point that several problems could arise.

Attorney Yehuda Sheffer, a former deputy state prosecutor and former head of the Israel Money Laundering and Terror Financing Prohibition Authority, also believes that international pressure on Israeli companies is an effective tool. Bodies like Israeli banks, he says, know that if they violate American restrictions, they will no longer be able to work with companies and institutions in the United States. “As far as Israeli law is concerned, there is no obligation on [Israeli financial institutions] to freeze assets,” he told Shomrim, “but they need to manage their risks as far as American law is concerned, so I believe that banks, for example, will freeze those assets.”

Sanctions against oligarchs would face an even stiffer challenge. Beyond the Israeli government’s efforts to run between the raindrops in its dealings with the Russian government and beyond the local legal question, the oligarchs likely to be targeted would be Russian Jews, some of whom have dual Israeli citizenship. “It will be interesting to keep an eye on what happens in Israel since I assume that some of the Russian Jews who have been subjected to sanctions will try to transfer their money here. That’s a real test,” says Sheffer. His comments fit in with reports that dozens of private jets have landed at Ben-Gurion Airport from Russia in the past week. “On a formal, legal level, Israel is not obligated by the sanctions, but it will still be interesting to see which side we fall on and whether financial institutions here will honor European and American sanctions.”

Sheffer says that there’s another potential loophole, too. “The real test will be cryptocurrency,” he says, “We know that a huge proportion of the companies that trade in cryptocurrency are concentrated in one square mile in Moscow and that a large proportion of the ransomware payments made in cryptocurrency come from Russia. So, we can expect a concerted effort to use cryptocurrency to bypass sanctions. The Financial Action Task Force only just introduced regulations for cryptocurrency this year and in Israel, the relevant regulation only went into effect last November. Many countries have only just started to enforce and regulation this issue.”