US, allies look to cripple Russia’s war effort with sanctions on Central Bank

By Beatriz Pascual Macias

Washington, Feb 28 (EFE).- The United States stepped up its pressure on Russia’s economy with the announcement Monday of sanctions on that nation’s Central Bank and other sources of wealth, a move aimed at stopping Moscow from using its large stockpile of reserves to finance its war on Ukraine and bolster its severely battered currency.

Washington’s measure effectively immobilizes any assets of the Central Bank of the Russian Federation held in the US or by US persons, wherever located, the Treasury Department’s Office of Foreign Assets Control said in a press release.

It emphasized that the US has not acted alone, recalling that on Saturday Washington’s partners and allies also committed to imposing measures that will prevent Russia’s Central Bank from using its hard-currency reserves to undermine the impact of US sanctions and noting that the European Union followed up with their restrictions on Sunday night.

“The unprecedented action we are taking today will significantly limit Russia’s ability to use assets to finance its destabilizing activities, and target the funds (Russian President Vladimir) Putin and his inner circle depend on to enable his invasion of Ukraine,” Treasury Secretary Janet Yellen was quoted as saying.

“Today, in coordination with partners and allies, we are following through on key commitments to restrict Russia’s access to these valuable resources.”

The objective is to prevent Moscow from using dollars, euros and other hard currencies in its store of reserves – valued at $630 billion – for conducting the war or minimizing the impact of other sanctions imposed by Washington and its allies since the invasion began last Thursday.

White House officials predicted that the sanctions will have a further negative impact on the Russian economy and particularly the ruble, which plummeted by nearly 30 percent relative to the dollar and the euro on Monday, a plunge not seen in nearly three decades.

It was the first day that several Russian banks were banned from accessing the SWIFT global payments system at the behest of the EU, the US and other allies in response to Russia’s invasion of neighboring Ukraine.

In addition to Russia’s Central Bank, US persons also are barred from engaging in transactions with the National Wealth Fund of the Russian Federation and Russia’s Ministry of Finance.

The Treasury Department press release also recalled that at President Joe Biden’s direction OFAC last week sanctioned the Russian Direct Investment Fund, a key Russian sovereign wealth fund with exposure to the US financial system, and its chief executive officer, Kirill Dmitriev – a known Putin ally.

“Recently designated Russian President Vladimir Putin and his inner circle of cronies have long relied on RDIF and Dmitriev to raise funds abroad, including in the United States,” it added.

Nevertheless, the US has made an exception for “certain energy-related transactions” with Russia’s Central Bank.

The Biden administration has held back from imposing energy-related sanctions due to potential negative consequences for the US economy and particularly the European economy, which relies heavily on Russian oil and gas for energy supplies.

Washington’s efforts are focused now on coordinating with its Western allies the list of Russian banks that will be excluded from SWIFT, a move that will further isolate Russia’s economy.

Neutral Switzerland also adopted the EU’s sanctions package against Russia and said it would freeze assets belonging to Putin, Foreign Minister Sergey Lavrov and Prime Minister Mikhail Mishustin.

Russia’s Central Bank on Monday morning hiked interest rates to 20 percent from 9.5 percent to offset the increased risk of sky-high inflation and the ruble’s depreciation, while Moscow ordered exporters to convert 80 percent of their foreign currency revenues dating back to Jan. 1 to rubles.

The bank said it would also release 733 billion rubles (around $7 billion) of bank reserves to protect the liquidity of lenders affected by the Western sanctions.

In a fresh blow to Russia’s economy over the weekend, Norway’s sovereign wealth fund announced it would divest its Russian holdings, which total a sum of around $3.4 billion, the government announced Sunday.

Responding to the sanctions in a meeting with economic officials, Putin described the West as an “empire of lies.”