US targets Russia’s central bank in latest sanctions action

WASHINGTON, USA – The United States on Monday, February 28, blocked Americans from engaging in any transactions involving Russia’s central bank, dealing a crushing blow to the country’s economy in further punishment of Moscow over its invasion of Ukraine.

The fierce economic sanctions imposed by the United States, which also bar transactions with Russia’s finance ministry and national wealth fund, are likely to jack up Russian inflation higher, cripple its purchasing power, and drive down investments, US officials said on Monday as the new measures took effect.

The move comes after the United States and its allies last week imposed several rounds of sanctions targeting Moscow, including against Russian President Vladimir Putin and Russia’s largest lenders, after the country’s forces invaded Ukraine.

“Our objective is to make sure that the Russian economy goes backwards if President Putin decides to continue to go forward with an invasion in Ukraine, and we have the tools to continue to do that,” a senior US administration official said on Monday.

Talks between Russian and Ukrainian officials began on the Belarusian border on Monday, as Russia faced deepening economic isolation four days after invading Ukraine in the biggest assault on a European state since World War II.

The US Treasury Department in a statement on Monday said it had also slapped sanctions on a key Russian sovereign wealth fund, the Russian Direct Investment Fund, its management company, and its chief executive, Kirill Dmitriev, whom Washington accused of being a close ally of Putin.

The United States and its allies had announced on Saturday, February 26, they would take action against Russia’s central bank and bar some of the country’s banks from the SWIFT international payments system, in a move that experts saw as a significant escalation of the West’s sanctions against Moscow.

In an emergency move, the Russian central bank raised its key interest rate to 20% from 9.5%. Authorities told export-focused companies to be ready to sell foreign currency.

It also ordered brokers to block attempts by foreigners to sell Russian securities.

The US official on Monday said the measures “immobilized” any assets Russia’s central bank held in the United States in a move that will hinder Russia’s ability to access hundreds of billions of dollars in assets.

“Putin’s war chest of $630 billion of reserves only matters if he can use it to defend his currency, specifically by selling those reserves in exchange for buying the rouble,” a second senior administration official said.

“After today’s action, that will no longer be possible and ‘Fortress Russia’ will be exposed as a myth.”

Mark Sobel, a former senior Treasury official who serves as the US chairman of the OMFIF forum for central banking, economic policy, and public investment, said the action was a “tremendous example of Western unity.”

“This all happened overnight, and the force of it basically cut off a significant country from the global financial system overnight. And there’s no precedent for that,” Sobel said.

Energy supplies

The Treasury issued a general license alongside Monday’s action authorizing certain energy-related transactions until June 24.

President Joe Biden’s administration has been concerned that its sanctions could raise already high gas and energy prices and has taken steps to mitigate that.

The US officials said Washington would continue to tailor its measures against Russia to limit the impact felt at home and allow for steady energy supplies to global markets.

They also warned that the United States would not hesitate to impose more consequences on Russia and was actively exploring measures that would cut off Russia from critical technologies it needs to remain a major energy producer in the longer term, citing similar steps already taken by the European Union.

They said Washington was also watching Belarus’ involvement closely, adding that the strong Russian ally could face more punitive action if it continues to aid Moscow in the invasion.

“These are serious consequences for Russia’s unprovoked invasion of Ukraine and we won’t hesitate to level more if necessary,” the first official said. – Rappler.com