Russia-Ukraine War: Russia’s invasion of Ukraine has entered day 44.
Washington:
The United States is tightening sanctions on Russia to deprive Moscow’s “war machine” of money and components needed to sustain its invasion of Ukraine, but curbing a key source of funding, Russian energy exports, will take time, the deputy said US Treasury Secretary Wally Adeyemo told Reuters on Thursday.
The United States and its allies have “much more we can and will do” to punish Moscow if Russia does not stop its invasion, Adeyemo told Reuters in an interview.
Ukrainian leaders on Thursday urged the democratic world to stop buying Russian oil and gas and to completely exclude Russian banks from the international financial system.
After an initial attempt to freeze Russian assets, Washington and its allies this week announced phased steps as they near the limit of sanctions to punish Russia without also causing economic pain domestically.
A new investment ban announced by President Joe Biden on Wednesday bans Americans from investing in stocks, debt and mutual funds of Russian companies and cuts off Russia’s defense industry and other sectors from the world’s largest source of investment capital, Adeyemo said.
“It means Russia is being deprived of the capital it needs to build its economy but also to invest in its war machine,” Adeyemo said.
Asked if it would ban companies already in Russia from continuing to fund these operations, he said the Treasury Ministry is consulting with the private sector.
Kremlin officials, who have described their actions in Ukraine as a “special military operation,” have insisted Western sanctions will have no impact on their goals and will solidify Russian support.
Adeyemo said the United States and its European allies would target Russian military supply chains to deny access to key components – “things that are important to building their tanks, supplying missiles and making sure they have fewer resources” to to fight the war in Ukraine but also to project power into the future.
“I think the impact will be immediate, just as the impact on the economy was immediate,” Adeyemo said. Russia’s economy is heading for a 10% contraction this year and inflation is nearing 20%, US officials estimate.
He declined to say whether a new list of sanctions against Russian state-owned companies, expected on Thursday, would include suppliers of defense industry components.
Brian Deese, director of the White House Economic Council, said on Wednesday that the Biden administration’s latest sanctions package included transactions with Russian state-defense giants United Aircraft Corp, maker of Sukhoi and MiG fighter jets, and United Shipbuilding Corp. would forbid.
Adeyemo said Russia’s defense sector had established front companies since 2014 to acquire essential supplies and materials to build Moscow’s military. Some of these companies were sanctioned last month.
RUBLE SUPPORT FORGIVEN WAR `PROPRIATIONS
Financial sanctions have forced Russia to spend more of its hard-currency energy earnings to defend its ruble currency, Adeyemo said, draining funds available for the war effort.
After shedding 45% of its value against the dollar in the first two weeks of the invasion of Ukraine, the Russian ruble has risen to just below its pre-war levels thanks to capital controls by Moscow and distortions by Russia’s central bank and US officials.
“It means that Russia has less money and the president is forced to choose between supporting the economy and investing in the war in Ukraine,” he said. Adeyemo said his meetings with European allies in London, Brussels, Paris and Berlin over the past week have helped focus on next steps and speed up sanctions announced on Wednesday.
Adeyemo said he was encouraged by “strong statements” from European countries about reducing their dependence on Russian energy, but said the continent is in a different position than the United States, the world’s largest oil producer.
“Because of our ability to produce energy at home, we were able to ban Russian imports of oil to America fairly quickly,” he said. “They’re going to need more time, but what they’re doing is they’re reducing their dependency over time.”
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