In its complex battle of sanctions chess with Vladimir Putin, the west has so far confined itself to rather modest tactics. Visa bans on leading officials and freezing the assets of minor companies amount to the economic equivalent of nudging a few pawns slowly up the board.

People familiar with the US treasury department playbook, and the financial weaknesses of the Russian economy, say there are far more aggressive and dangerous gambits available as Washington seeks to retaliate against Moscow for its two-month assault on eastern Ukraine. The US has the ability to hurt the Russian economy significantly, according to Juan Zarate, a former deputy national security adviser who oversaw "smart" sanctions and asset freezes against al-Qaida, North Korea and Iran. In a recent book, Treasury's War, he described how this campaign by "guerrillas in grey suits" targeted "the soft financial underbelly of our country's enemies".

Russia, with a $2tn (£1.19tn) economy, is a different case from Iran, Zarate said. "But there are elements of the playbook that can be used to impose real costs." The US could use presidential orders or a provision of the Patriot Act, legislation drawn up after the September 11 attacks, to freeze Russian institutions out of the international financial system.

Slapping a sanctions order on a Russian bank would turn it into an economic pariah. "Cutting off some of their major institutions, or even oligarchs and their networks, you have the ripple effect of the European private sector deciding that they are not going to do business with the entities," he said.

Such a move could be devastating for Russia, which is more dependent on the dollar than almost any other emerging market. Almost 90% of Russia's exports are traded in the greenback. The state has low debt levels, but the country's banks and companies have become hooked on a steady flow of foreign credit. Russian companies owe $439bn to foreign lenders and banks owe $215bn.

But even this would not add up to "a full-throated financial campaign" Zarate said. He would go after Russian officials implicated in corruption, organised crime or flouting US sanctions against countries, such as Belarus and Iran. "If you added to that an anti-kleptocracy campaign against the Russian elite, to include the president himself and his inner circle, then I think you would have a very aggressive campaign."

Such a move is exactly what some Republican senators in Washington are looking for. A bill introduced in the US Senate last week and backed by John McCain and Bob Corker calls for asset freezes on Russia's biggest banks, Sberbank and VTB, the state energy companies Gazprom and Novatek, and the arms dealer Rosoboronexport.

Many experts see this approach as a last resort if Russian troops were to raise their flag in eastern Ukraine. "The worst-case scenario is a military incursion leading to these tougher sanctions," said Chris Weafer of the Moscow-based consultancy Macro Advisory. Excluding Sberbank and VTB from international capital markets would have major implications for their funding, forcing domestic companies to use another currency for international trade. "The reality of being cut out of the western banking system is that you go into recession."

The effects would cascade down the economy, as banks and firms struggled to raise funds to roll over debts worth $193bn that need to be refinanced this year. "If they can't refinance then it means higher interest rates, it means less investment, it means less and less growth, and more capital flight and pressure on the rouble," said Timothy Ash of Standard Bank.

This scenario spells deeper pain for an economy already hurting. Despite Putin's drive to stop wealthy Russians squirrelling away their riches in foreign countries, the country has been haemorrhaging capital. Almost $64bn was moved out in the first three months of 2014, as much as in the whole of 2013. Since the start of the year, stock markets have lost 14% of their value and the rouble is down 8% against the dollar. Russia's credit rating has been downgraded to one notch above junk and growth is expected to stall completely this year. This for a population used to average annual growth as high as 7% in Putin's first two terms.

International companies, from Morgan Stanley to Norway's Statoil, are putting deals on ice. Shell has indicated it will not make any new investments in Russia in the near term, and the pace of western companies' and banks' "self sanctioning" is picking up, Weafer said.

Any extension of western sanctions, however, could trigger a response. Russia could hurt western carmakers and aerospace companies "directly and quickly" by blocking the sale of metals, Weafer said. The US has some vulnerable companies, such as Boeing, which plans to buy $18bn of Siberian titanium in the coming years. Europe, which does 15 times more trade with Russian than the US, could be hit much harder.

"The Europeans are not going to go down the Iranian route on Russia," said Judy Dempsey at the Carnegie Centre in Berlin. "The Europeans are completely divided and the big member states have very significant trade interests with Russia."

The US can go it alone, but it is not certain it will. Freezing Russia out of the global financial system could harm the foreign banks that have put so much cash its way. An executive at the Fitch ratings agency said last week that Washington was holding back on sanctioning Russian companies that owe money to US bondholders.

If the west's response is ad hoc, the Kremlin is also scrambling to find an answer. Sergey Glazyev, a hawkish adviser to Putin on Ukraine who features on both the US and EU sanctions list, caused alarm among the liberal Russian elite when he called for the "de-dollarisation" of the Russian economy. In a plan seen by the financial daily Vedomosti, he proposed that state banks and companies should switch foreign-currency assets into roubles and that a public information campaign should be undertaken to dissuade Russian people from relying on foreign currency. This "back to the USSR plan", as one commentator dubbed it, was quickly dismissed by Alexei Kudrin, Russia's former finance minister, as more damaging than western sanctions.Russia still has $486bn in reserves to help it through uncertain times, but that is already $40bn less than when the first protests took place in November. "They have a lot of reserves, so they are able to ride it out for a period, but over time the lack of growth and capital flight will weigh on Putin," Ash said.The economy is not in crisis yet, said Natalya Volchkova, a professor at the New Economic School in Moscow, but stagnation has deepened. She thinks, however, that the west "might be missing the point" on sanctions, because Putin and his circle have already factored them into their action in Ukraine. She also thinks dollar dependency can be overstated, in that countries importing Russian gas and oil also "find it convenient" to pay in dollars.

Promoters of economic sanctions, including Zarate, agree they are not the ultimate answer. "They are limited in what they can produce in the short term and whether they ultimately change the behaviour of the regime. It may be that these tools alone won't do that."

Even Iran, seen as a model in terms of using sanctions, has shown the limits of such measures. In a sour note for the White House, Iran is circumventing the limits on its oil exports with a $20bn oil-for-goods deal – with Russia.

Sanctions have become a distraction to a serious effort to prop up Ukraine with political and financial support, argues John Lough of Chatham House. He also detects a lack of will to isolate Russia, evident during its war with Georgia in 2008, when condemnation from European governments was mixed with a reluctance to impose sanctions.

"The lesson [Russia] learned after 2008, after the invasion of Georgia, is that business will come back. The west has too many interests to punish Russian strongly."