The Treasury Department imposed strict financial sanctions on a Russian economy already in free fall on Monday, banning transactions with the Central Bank of Russia and the Russian foreign investment fund.
The new sanctions effectively cut Russia’s central bank off from the US dollar, limiting Russian President Vladimir Putin’s ability to mitigate the impact of previous sanctions.
Individuals and businesses in the United States can no longer conduct financial transactions with or on behalf of the Central Bank of the Russian Federation, the Russian Federation’s National Wealth Fund, or the Russian Federation’s Ministry of Finance. Foreign financial firms are also prohibited from sending US dollars to the Russian central bank, finance ministry, or wealth fund under sanctions.
To avoid a sharp rise in global oil and natural gas prices, the Treasury Department said it would make exceptions for certain energy-related payments. However, US officials said Monday that the new sanctions would only exacerbate the Russian economy’s collapse, which they blame Putin’s invasion of Ukraine.
On a conference call with reporters, a senior Biden administration official said, “Our strategy, to put it simply, is to ensure that the Russian economy goes backwards as long as President Putin decides to go forward with his invasion of Ukraine.”
Treasury’s new sanctions come just two days after the US and its allies announced that they would target Russia’s central bank’s more than $600 billion in foreign reserves, which they described as Putin’s “war chest” to avoid sanctions.
Russia’s foreign reserves will be frozen, preventing the country from selling other countries’ currency to prop up the ruble. The mere announcement of the impending sanctions caused the ruble to plummet by more than 30% against the dollar on Monday, prompting the Russian central bank to raise its benchmark interest rate.
“This is a vicious feedback loop set in motion by Putin’s own decisions and accelerated by his own aggression. Putin is giving the Russian people a very bad deal, as the world disconnects Russia from the global financial system and all of its benefits “According to a senior official in the Biden administration.
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