Joe Biden on Tuesday unveiled sanctions on Russian sovereign debt and promised “an even steeper price” for Vladimir Putin if the Kremlin “continues its aggression.”
The move to curtail Moscow’s access to Western capital came hours after Germany effectively killed Nord Stream 2. Olaf Scholz told the Economic Ministry to pull its supply security evaluation of the pipeline, rendering certification impossible.
Scholz said the situation has now “fundamentally” changed. Putin’s recognition of separatist republics in Ukraine forced Germany to “reassess the situation.” That assessment was swift and the conclusions unfavorable. Biden said the US would work with Germany to halt the pipeline.
Although the US and its allies are still open to diplomatic engagement with Russia, Biden told Americans that Putin is bent on conjuring an excuse to take things further. A full-fledged assault on Ukraine is a “severe threat,” he said. NATO echoed that warning.
Read more: Madness
Boris Johnson sanctioned five Russian banks and a trio of individuals, while the EU took aim at some of the same financial institutions, as well as 351 Russian lawmakers. If approved by member states, the Russian government would lose access to EU financial markets.
In a statement, G7 foreign ministers expressed “unwavering support and commitment to the sovereignty and territorial integrity of Ukraine within its internationally recognized borders,” while condemning Putin’s actions.
The sanctions were described by some as relatively limited. Sberbank and VTB were spared by Johnson and the EU — for now. Of course, the West doesn’t want to exhaust its capacity to implement an economic embargo. After all, once the limits are reached on that front, and assuming diplomacy fails, there’s only one avenue left to pursue.
“Today’s actions… begin the process of dismantling the Kremlin’s financial network and its ability to fund destabilizing activity in Ukraine and around the world,” Janet Yellen said. Below find the relevant passages on Russian sovereign debt from the OFAC announcement:
As a part of today’s actions, OFAC increased restrictions on dealings in Russia’s sovereign debt, further cutting Russia off from sources of revenue to fund its government or President Putin’s priorities, including his further invasion into Ukraine. These restrictions significantly cut off a core way for Russia to raise money. This kind of measure creates a strain on resources for the Russian state and greater risk for its ability to manage its finances.
Specifically, OFAC issued Russia-related Directive 1A under E.O. 14024 [which] extends existing sovereign debt prohibitions to cover participation in the secondary market for bonds issued after March 1, 2022 by the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation.
For his part, Putin declared the Minsk accords void. They “no longer exist,” he mused, citing his own decision to recognize the breakaway republics. He also said they were “killed long before the recognition” and ultimately blamed Ukraine, insisting the nation demilitarize itself and give up its NATO ambitions. Russia’s upper house approved Putin’s “request” (try not to laugh) to deploy troops to the Donbas, where Russian forces will “bring peace and end the bloody civil war,” according to Moscow.
Notably, Putin said the Kremlin recognizes separatist claims to territory controlled by the Ukrainian government. They (the separatists) should come to an agreement with Kyiv on the issue. Putin isn’t sending troops immediately, but alluded to the possibility of deploying soldiers soon.
“What we saw broadcasted with a delay from Russia was Putin looking bored behind his desk in a vast white room that looked like the final ‘2001’ Kubrick set, while uniformed Kremlin creatures played the world’s worst ever game of musical chairs before reporting to him solemnly one by one,” Rabobank’s Michael Every wrote, describing one of several bizarre scenes the world was subjected to early this week. “Once you move borders unilaterally by force you truly enter the multiverse of madness,” he added. “‘Reality’ can be upended in places that you thought it couldn’t be.”
Biden described Tuesday’s sanctions as the “first tranche,” while implicitly suggesting the moves are commensurate with Putin’s actions, which he called “the beginning of a Russian invasion.”
I suppose this goes without saying, but if Biden chooses, and Congress is fully on board, the US could tighten the screws on multiple fronts and drive Russia to the brink of economic oblivion. Yellen threatened Putin’s Russia directly. “If it further invades Ukraine, the United States will swiftly impose expansive economic sanctions that will have a severe and lasting impact on Russia’s economy,” she warned.
That would, of course, be risky and not without reciprocation. But at the end of the day, Russia needs dollars just like everyone else. The yuan isn’t a substitute. Not yet, anyway.
The problem with implementing draconian sanctions and taking other steps to turn Russia into a pariah like Moscow’s friends in Tehran, is simple enough. Desperate despots do desperate things. And this despot has a nuclear arsenal large enough to blow up a planet.
Most of the children of the Russian elites live abroad – London but also the EU. A decent chunk of their wealth is also in the West. Technically, It shouldn’t be too complicated to round the children up and confiscate the wealth.
But, even without going to such illiberal extremes, I also think that act as somewhat of a deterrent for Putin to nuke the West. I would imagine his cronies wouldn’t be quite so tame if he was seriously considering turning their children into radioactive ashes and vaporising their wealth.
What exactly would this look like? Since 2014 Russia has insulated itself from a SWIFT cutoff, and they’ve inked longterm energy deals with China. I don’t doubt further sanctions could hurt, but I don’t see them creating “economic oblivion.” If anything, the sanctions since 2014, after the initial pain, have simply helped domestic industries which offer import alternatives. Domestic agribusiness has boomed, and of course it’s Putin’s cronies who are at the head of these companies.
What pain can be imposed that threatens actual political disruption, at this point?
Disconnecting Russia from the internet sounds like a good defensive option at this time.
As to the impact of sanctions on the Russian economy, it is the belief among some that Russia is already very close to being an autarky and capable of producing most of what it needs within its own borders. If this is indeed true, then the sanctions will have little impact. If not it will be an interesting case study on what happens when a country must become self reliant.
I have to believe Russia has gamed every possible scenario and that this is coming as no surprise and have prepared for it. It may make them stronger in the long run.
Just a thought, isn’t Russia the largest diamond producer in the world and if they wanted to could crush the diamond cartel.
It wasn’t too long ago that a group of Russians were inside the Oval Office, behind closed doors, slapping each other on the back. How did America’s friendly open door relationship with Putin devolve back to thinking he’s a KGB thug?
We had an election in 2020 and Putin failed to stuff enough digital ballot boxes to keep his puppet in power. They can be found partying with our oligarchs at the Mar-a-Lago Club in Palm Beach Florida now, comrade.
But he is a KGB thug. Are you not sure about that? Seems as if Trump, Fox News, and most of the GOP think he’s the second coming of Thom. Jefferson.
Invasion or Inversion, that is the question (for investors). Whether ’tis nobler in the mind to suffer the slings and arrows of recurring interest rate hikes and QT. Or take arms against a sea of Russians. And by opposing confront them. Or to sell, go to cash and end the thousand natural shocks that stocks are heir to. ‘Tis a Fed put devoutly to be wish’d. …..with deep apologies to the Bard.
Well-stated.
@rem that’s the rub eh? Skaky also scribbled, “Whiles I am a beggar, I will rail and say there is no sin but to be rich; and being rich, my virtue then shall be to say there is no vice but beggary”, which just means we ‘individuals’, meaning most Homo saps in the West, fit our views to our finances.
If you just go by the numbers, then true nuff, Rem — Sleep, is better with cash.
The American public has become a terminally silly people. While Putin captivated our attention wiggling his laser pointer on Ukraine he effectively occupied Belarus quick as a bolt, without a quarrel. If you thought Powell was so far behind the curve he doesn’t even see it, consider, how many other curves lie ahead that the American and European public are oblivious to. Here’s one from The Hill, by way of a CSIS piece, “The Israeli also talked about the Emiratis’ hedge with China. Perhaps a quarter million Chinese live in the UAE now, and a majority of China’s trade with Europe and Africa passes through Emirati ports.” Of course, Israel and UAE are key ‘allies’ in the ME for the West’s projection of raw Power. Meanwhile, the gaseous buffoon that once ‘led’ the digital information economies of the ‘Free Whirled’ praises Putin’s “genius” for being a geopolitical Fox in fawning desperate pleas. Like he wants to be best friends with the cool kids again in 2024. That Trump so misunderstands the abject contempt Putin and his little rascally gang have for those that betray their own country is stunning. Is it that Trump’s ego simply can’t grasp what an absolute tool of Putin he is, or, even worse still, is that the Trump family does not understand this, and yet, don’t care as long as the payday is sufficient? Is The Donald actually the Reynard of Fox News?
Another choice quote from The Hill article, When our Middle East friends talk, they talk about hedging, was, “The United States is unaccustomed to a world of hedging partners.” My only remark, in this cramped comment box, on hedging and ‘the real world’ the America public may or may not wake up to at some belated point, is the following. Germany may make a show of not opening the NORD 2 spigot, but, where is NORD 1? Flowing full throttle right next to nord stream 2 perhaps? Hedgies here, there, and everywhere. With allies like this, who needs …
Th situation is existential for Russia. The present scenario did not develop overnight . Living with a gun to your head is the alternative. They are not the only Nation in this identical situation . In Geopolitics it does not pay for anyone to drink to much of it’s own cool aid . I still think this resolves itself more or less favorably. Sure hope I am right !!
Achilles Heal for Russia is …Do they trust China ??? Think of the Romans for an example .
I found this Twitter post by a Finnish citizen to be a plausible explanation of why Putin is doing and what he wants: https://twitter.com/jmkorhonen/status/1496047631969234944?s=21
This is an excellent post. The Ukrainian situation truly is autocracy (corruption) vs. democracy.
Thanks for this link. It is spot on.
That was a great thread. This also from Fiona Hll in the NY Times also seems to have its finger on Putin’s pulse.
https://www.nytimes.com/2022/02/18/us/politics/putin-ukraine.html
If Putin is really only primarily concerned about his legacy and righting history’s wrongs (in his view), this may be his sweet spot. He has sowed his Kompromat, divided the West wherever possible and picked up an orange puppet who has a whole media arm and small army of aggrieved and armed white supremacists to help do his bidding right here on our shores. It’s frankly shameful that after watching four years of Mar-A-Lardo cozying up to Putin and Lavrov, the GOP is now falling all over itself to root and rationalize for Putin, and openly criticize Biden or even rooting against him. The revolution has been televised and it’s on right now.
With Nord Stream 1 and Bitcoin available – I am unsure about the effectiveness of sanctions. I am sure Nord Stream 1 has all valves open. Russian oligarchs have had months to convert to Bitcoin in preparation of this moment.
France is really looking smart with 70% of their energy produced by nuclear.
Good point about the French going nuclear. With ongoing innovations in reactors, France should be able to further and swiftly increase the percentage of electric power they produce with nuclear energy. And what a great time for Germany to learn more about nuclear power innovations.
I have a number of different points concerning sanctions, Putin’s aims and your political problems. Firstly, sanctions work! The government (and the people), will swear that, after initial adjustments, things are fine. They are not. Many locally produced items are of inferior quality to the imported ones and are much more expensive. They hurt the population every single day. I know, because I have been exposed to sanctions in at least 2 countries. Secondly, the Finnish guy Korhonen was absolutely correct. Putin needs to be stood up to now! Our politicians are currently buying “peace in our time.” Thirdly, the mind boggles that your right wing are supporting a non-democratic dictator who manipulates them coming and going and regards them contemptuously. Is this another example of the old political wisdom that “the enemy of my enemy is my friend?”
No sir. Our right wing is infested with oligarchs that plan to install a Putinist government in the US. They have severely damaged our democracy and it is still at risk. Believe your eyes when you see them supporting foreign dictators and expanding the rights of oligarchs. They are birds of a feather, not friends of the enemy of their enemy.