Source: AFP
The United States said on Friday it would impose sanctions on foreign banks backing Russia’s war in Ukraine, in a new bid to put economic pressure on Moscow as it diverges from the West on China.
Under an executive order to be signed Friday by President Joe Biden, the United States will be authorized to impose so-called secondary sanctions against financial institutions that support the Russian defense industry, officials said.
The United States, the world’s largest economy, was sending a message to financial institutions that they have “a very stark choice,” a senior official said on the customary condition of anonymity.
“At the end of the day, for almost any bank in the world, you give them a choice between continuing to sell a small amount of goods to Russia’s military-industrial complex or connecting to the U.S. financial system — they will choose to connect to the US financial system, given that our economy is much larger and our currency is the one used around the world,” he said.
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But Russia has been seeking to reduce its reliance on dollars, euros and yen since its invasion of Ukraine in February 2022 triggered a wave of Western sanctions.
China’s biggest banks have extended billions of dollars worth of renminbi loans to Russia since the war, as Western institutions pull out.
The American official expressed hope that European and American banks, although not directly investing in Russia, will put pressure on partners operating in the country.
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Russia’s economy has been hit by the pressure but remains on a growth trajectory, with the International Monetary Fund in October forecasting 1.1 percent growth for 2024.
A key target was Russia’s oil exports, with Western powers agreeing to a ceiling of no more than $60 a barrel.
The U.S. Treasury Department said Thursday that the cap cut Russia’s tax revenue from oil and petroleum products exports by 32 percent between January and November compared with a year earlier.
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But other estimates were less rosy about the impact. A recent study by the Kyiv School of Economics found that compliance with the price cap was virtually non-existent due to widespread fraud.
The new push for secondary sanctions comes as the Group of Seven industrialized nations balks at seizing Russian government assets to support Ukraine, another potentially important tool of pressure backed by the United States.
Direct US aid to Ukraine could also be halted soon, with Congress yet to approve a request from the Biden administration over an unrelated dispute over immigration policy.
The White House fears that ending the aid will give Russia a new boost against Ukraine, which has received $43 billion in military aid from the United States since the invasion.
In a separate action on Friday, the United States will make clear it will ban products originating in Russia, even if they are “substantially transformed” elsewhere, another US official said.
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The action will include a ban on diamonds that come from Russia but are processed elsewhere, he said, following a European Union ban announced this week on Russian diamonds.
The Russians have managed to soften the impact of the sanctions through trade through third countries, with Central Asian states in particular seeing sharp increases in technology shipments.
The United States has stepped up its use of secondary sanctions, despite concerns by some policymakers and experts that they will encourage other countries to move away from the dollar.
The United States has used its influence most visibly in Iran by threatening countries that buy oil from the clerical state.
Source: AFP