The latest round of sanctions builds on a presidential decree issued by Joe Biden in December, targeting Russian banks deemed to be facilitating the war in Ukraine. December’s measures applied to a list of around 1,200 companies and individuals, which has now been extended to about 4,500.
“Today’s actions ratchet up the risk of secondary sanctions for foreign financial institutions that deal with Russia’s war economy; restrict the ability of Russian military-industrial base to take advantage of certain U.S. software and information technology (IT) services; and, together with the Department of State, target more than 300 individuals and entities both in Russia and outside its borders—including in Asia, the Middle East, Europe, Africa, Central Asia, and the Caribbean—whose products and services enable Russia to sustain its war effort and evade sanctions,” the Treasury said in a statement.
“Russia’s war economy is deeply isolated from the international financial system, leaving the Kremlin’s military desperate for access to the outside world,” Secretary of the Treasury Janet L. Yellen was quoted in the statement as saying. “Today’s actions strike at their remaining avenues for international materials and equipment, including their reliance on critical supplies from third countries.”
The Reuters news agency quoted former White House senior director for international economics Peter Harrell as saying Washington was “shifting towards something that begins to look like an effort to set up a global financial embargo on Russia." These efforts were reflected in Wednesday’s announcement that the U.S. Treasury is taking aim at Russia’s financial system, including the Moscow bourse, the country’s biggest.
The Moscow Exchange promptly issued a statement following the new sanctions, in which it said dollar and euro trading had been halted with immediate effect. The move affects a central currency exchange and means trading in the two currencies will have to be conducted directly between buyers and sellers.
Targeting Russia’s war machine
The U.S. Treasury explained that the measures targeted "the architecture of Russia’s financial system, which has been reoriented to facilitate investment into its defense industry and acquisition of goods needed to further its aggression against Ukraine."
Russian businesspeople remained defiant, however.
“We don't care, we have Yuan,” one person at a large non-sanctioned commodities exporter told Reuters. “Getting dollars and euros in Russia is practically impossible."
The Yuan has overtaken the dollar as the most traded currency on the Moscow Exchange and accounted for 56% of all FX trading last month.
Russia’s central bank was also prepared for the development, having taken preventive steps over the last two years. Forbes Russia reported in 2022 that the Central Bank of the Russian Federation was working on a mechanism to manage rouble-dollar trading in the event of a suspension.
"This is bad, but expected news," one brokerage wrote on the Telegram messaging app.
In addition to the financial measures, the American sanctions also address technology used in the manufacture of weaponry. Many Russian systems downed in Ukraine have been found to contain components produced in the U.S., including microchips.
Washington’s new measures are intended to make it harder for Russian manufacturers to obtain such tech, including by tightening controls on Hong Kong-based shell firms supplying chips to Russia. IT services and software will also be affected, though the Treasury stressed that the restrictions were not intended to impact civilian use.
