The Biden administration emphasized on Monday the severity of the economic sanctions imposed on Russia over the weekend, in which the US and its allies targeted Russia’s Central Bank, preventing the Kremlin from accessing any of its more than $600 billion in reserves in the US or in foreign currencies denominated in US dollars.
The sanctions also target Russia’s National Wealth Fund and the Ministry of Finance, and officials said that it was clear from the start of the Ukraine invasion that Russian President Vladimir Putin intended to use Central Bank assets to mitigate the impact of sanctions.
“Today’s announcement prohibiting transactions with the Central Bank of Russia in the National Wealth Fund will significantly hamper their ability to do so, and inhibit their access to hundreds of billions of dollars in assets from our actions alone; they will not be able to access assets that are either in the United States or in U.S. dollars,” officials told reporters.
“This fund and its leaders are global symbols of deep-seated Russian corruption and influence peddling… It is also known to be closely linked to kleptocracy at the highest levels of the Russian government “an official clarified
“Our strategy, to put it simply, is to ensure that the Russian economy goes backwards as long as President Putin decides to proceed with his invasion of Ukraine,” a senior administration official explained.
Officials explained that the sanctions, a significant step for the Biden administration, were announced over the weekend after it became clear that action was required before the markets opened on Monday.
“We learned over the weekend from our allies and partners that the Russian Central Bank was attempting to move assets, and that there would be a large amount of assets beginning Monday morning from institutions all over the world.” So, we took these actions in such a way that they will be effective immediately,” an official said.
Officials stated that the “actions represent the most significant actions taken by the United States Treasury against an economy of this size and assets of this size,” noting that the Russian Central Bank is many times larger than Iran’s or Venezuela’s.
Officials would not say how much of the $630 billion “rainy-day fund” would be affected, but they did say the US is aware that the Central Bank of the Russian Federation has its assets spread across the globe.
“What we’ve done today prevents them from not only using those dollars in the United States, but also from using them in other places, such as Europe or Japan, to defend their currency and support their institutions. And our goal was to ensure that they did not only do not have access to dollars, but also to other currencies “an official stated
According to the US Treasury, the move “effectively immobilizes any assets” of Russia’s Central Bank and “will disrupt Russia’s efforts to prop up its rapidly depreciating currency.”
According to one analyst, this will have a greater impact than depriving Russia of access to the SWIFT international banking system. According to analyst Eddie Fishman, this is a “sanctions action without precedent,” and it “renders ALL of the Russian government’s rainy-day funds inert.”
Secretary of State Antony Blinken stressed in a statement that the action was being taken in collaboration with European allies. Another analyst noted that, given the technical and complex nature of the new sanctions, the European Union and the United States acted quickly and in lockstep.
On the energy front, administration officials stated that they have multiple reasons for keeping energy out of the sanctions packages for the time being: “A — because we want to support the global economic recovery, but B — because we don’t want prices to spike for President Putin’s benefit as a major energy exporter.”
Officials said over the long term, the U.S. and allies will look to degrade Russia’s capacity to be a leading energy supplier, perhaps working to keep it from developing energy technologies.