U.S. bans transactions with Russian Central Bank, Wealth Fund

President Joe Biden’s administration on Monday banned U.S. people and companies from doing business with the Bank of Russia, the Russian National Wealth Fund and the Ministry of Finance.

The moves by the U.S. Treasury’s Office of Foreign Assets Control will “effectively immobilize” any Russian central bank assets held in the U.S. or by U.S. nationals, according to a Treasury department statement.

The U.S. also announced new penalties on a key Russian sovereign wealth fund, the Russian Direct Investment Fund, and its Chief Executive Officer, Kirill Aleksandrovich Dmitriev, a close ally of Russian President Vladimir Putin.

The announcements marked the latest blow in the West’s financial retaliation against Russia following Putin’s invasion of Ukraine and are designed to shake an already staggering Russian financial system.

“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 Putin and his inner circle depend on to enable his invasion of Ukraine,” Treasury Secretary Janet Yellen said in a statement.

The U.S. and EU blocks on the Russian central bank’s assets will immobilize nearly half of Putin’s warchest, according to a Treasury spokeswoman. Roughly 13% of the central bank’s reserves are held in China, she said.

Putin’s warchest is an estimated $630 billion in reserves, the officials said, and the measures are aimed at blocking his ability to sell those to mitigate financial pressure domestically.

Russia’s own data published in January shows that $100 billion of the reserves were held in U.S. dollars as of June.

The U.S. separately issued a license allowing certain energy transactions with the central bank, a carve-out a senior administration official said is aimed at minimizing the fallout in Europe and energy markets. It will take time for Russian institutions to figure out how to segregate energy transactions from other measures, the official said.

Finalizing banks cut off from SWIFT

The U.S. is continuing to work with European Union partners to finalize the list of banks that will be cut off from the SWIFT system, a second senior administration official said. The list of banks will be finalized by the EU because SWIFT is under Belgian authority.

U.S. officials are monitoring Belarus’s role in the Russian invasion, and that country will also face further consequences if it continues to aid and abet Russia, one of the officials said.

Read more: Russia Erects Financial Defenses to Shield Economy From Curbs

The moves came two days after the U.S., U.K., Canada and the EU said they would block major Russian banks from SWIFT, take steps to stop Russia’s central bank from rescuing the nation’s economy and move to seize Russian oligarchs’ yachts and residences in the West.

The U.K. Treasury said earlier Monday it will act immediately to stop people and companies doing businesses with the Bank of Russia, the Russian National Wealth Fund and the Ministry of Finance.

The moves to isolate Russia from the global economy came after an initial round of penalties failed to persuade Putin to withdraw his forces from Ukraine.

The Bank of Russia acted quickly to shield the nation’s $1.5 trillion economy from the sweeping penalties, more than doubling its key interest rate to 20%, the highest in almost two decades, and imposing some controls on the flow of capital.

Facing the risk of a bank run, a rapid sell-off in assets and the steepest depreciation in the ruble since 1998, policy makers banned brokers from selling securities held by foreigners starting Monday on the Moscow Exchange.

Even before the new sanctions have taken effect, the Russian financial system has buckled under their weight.

The ruble continued to plunge against the dollar, with the currency losing a third of its value in offshore markets at one point Monday, hitting an all-time low of 109 per dollar in Moscow.

The announcements came as a Ukrainian delegation led by the defense minister began talks with Russian officials. Ukrainian President Volodymyr Zelenskiy has voiced skepticism that the talks, taking place on the country’s border with Belarus, would yield results but said he was willing to try if it meant any chance of peace.

The European Union over the weekend closed its airspace to Russian aircraft and announced it would fund weapons purchases for the first time to aid Ukraine.

BP Plc on Sunday moved to dump its nearly 20% stake in the Russian oil giant Rosneft PJSC. By joining the worldwide effort to kneecap Russia’s economy, the British company could take a financial hit of as much as $25 billion. While the move came amid pressure from the U.K. government, it showed how far Western powers are willing to go in punishing the Kremlin.

Putin ordered Russia’s nuclear forces on high alert following the sanctions, which he called an act of Russian aggression. White House press secretary Jen Psaki said on ABC’s “This Week” the move was part of a pattern of Putin “manufacturing threats that don’t exist in order to justify further aggression.”

The United Nations Security Council called for a rare emergency session of the General Assembly to discuss Russia’s invasion of Ukraine. The session is set to be held Monday.

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