The President of the United States, Joe Biden, signed a decree this Friday that will allow sanctions to be imposed on foreign banks that support Russia’s war efforts in Ukraine, the White House reported. The measure would authorize the United States to issue “secondary sanctions” against financial institutions that support the Russian defense industry, according to the government.
It is about “further strengthening control over the Russian war machine and those who make it work,” commented US national security advisor Jake Sullivan in a statement. “We are sending an unmistakable message: anyone who supports Russia’s illegal war effort risks losing access to the American financial system,” he said.
Washington seeks to weaken the mechanisms established by Russia to circumvent the sanctions and embargoes accumulated by the West since the invasion of Ukraine. kyiv’s main ally, the United States is confident in the deterrent effect of the announcement, which occurs in the midst of difficult negotiations in Congress to approve a new financial aid package for kyiv.
“What we want is to target the materials that Russia needs to produce weapons. (…) To obtain these materials, (the Russians) must go through the financial system, which makes them a potential flashpoint, and this tool points to that critical point,” a senior White House official who requested anonymity told reporters Thursday.
Banks have “the option of continuing to sell a modest amount of goods to the Russian military industry, or being connected to the US financial system. They will choose to be connected to the US financial system,” he added.
Most European and American banks, he said, have already stopped financing activities in Russia, but Washington counts on their support to pressure banks from other countries that continue to operate in the country.
Treasury Undersecretary Wally Adeyemo also stated that major banks in countries such as China, Turkey and the United Arab Emirates have made efforts to avoid coming into conflict with US sanctions, and that the new measures would target smaller institutions. Russia has created front companies to hide purchases through third countries, Adeyemo said in an interview with CNBC.
“They don’t go to big companies (but to) small companies for things like microelectronics, machine tools and engine parts,” he said. “But all these companies still have to use the financial system.”
The United States aims to extend its embargo measures against Russia to products manufactured from Russian raw materials, especially diamonds and seafood, even if they have been processed and exported by third countries.
Since the Russian invasion of Ukraine in February 2022, Western countries have adopted numerous asset freezing measures against Russian entities, individuals or companies. They have also multiplied prohibitions on importing raw materials or merchandise, with the aim of slowing down the war machine and weakening the economy.
“Our sanctions and restrictions have had significant impacts on Russia’s ability to replace the equipment, materials and technology it needs to fuel its aggression (on Ukraine). They have weakened Russian resistance,” Sullivan said.
According to Washington, Russia has developed military cooperation with Iran, which supplies it with drones, and with North Korea. But almost two years after the start of the war, the Russian economy appears to be resisting.
Moscow continues to sell hydrocarbons, especially to China and India, and has found, according to experts, mechanisms to circumvent measures such as the limit on the sale price of its oil imposed by the West. The International Monetary Fund (IMF) projects growth of just over 2% for the Russian economy this year, and 1% next year.
The next big step in financial action against Moscow, for the United States and its allies, could be to confiscate already frozen Russian funds deposited in Western banks to finance Ukraine. The senior US official already mentioned limited himself to indicating that there are currently “active discussions” among Westerners about these Russian assets.
