US Escalates Sanctions With a Freeze on Russian Central Bank Assets

on Feb28
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The fund, according to its website, works with the “world’s foremost investors” to make direct investments in leading and promising Russian companies. It has reserved capital of $10 billion under management and has attracted over $40 billion into the Russian economy. The sanctions ban any Americans from investing in the fund and freeze any assets that it holds in the United States.

Senior Biden administration officials said the actions were effective immediately. They noted that the value of Russia’s ruble had already fallen more than 30 percent over the weekend and that Russia’s central bank more than doubled its interest rate to try to mitigate the fallout. They also predicted that inflation would soon spike and economic activity would contract as the country’s currency lost value.

Even nations that usually remain neutral in global disputes entered the fray.

Switzerland, a favorite destination for Russian oligarchs and their money, announced on Monday that it would freeze Russian financial assets in the country, setting aside its tradition of neutrality to join the European Union and a growing number of nations seeking to penalize Russia for the invasion of Ukraine. The country said it would immediately freeze the assets of Mr. Putin, Prime Minister Mikhail V. Mishustin and Foreign Minister Sergey V. Lavrov, as well as all 367 individuals the European Union imposed sanctions on last week.

“These are probably the most serious economic sanctions ever imposed on a country,” said Elina Ribakova, the deputy chief economist of the Institute of International Finance, predicting that Russia’s economy could contract by double digits.

The U.S. moves represent a significant escalation of sanctions, although the Treasury Department said it was making an exemption to ensure that transactions related to Russia’s energy exports could continue. It is issuing a “general license” to authorize certain energy-related transactions with the Russian central bank.

The carve-out means that energy payments will continue to flow, mitigating risks to global energy markets and Europe, which is heavily reliant on Russian oil and gas exports. U.S. officials said that they wanted energy prices to remain steady and that they did not want a spike in prices to benefit Mr. Putin. However, they noted that they were considering measures that would restrict Russia from acquiring technology it needs to be an energy production leader in the long term.

“The U.S. and other Western economies have deployed a set of highly potent financial weapons against Russia with remarkable speed,” said Eswar Prasad, a Cornell University economics professor and a former International Monetary Fund official. “Cutting off access to global financial markets and to a country’s war chest of international reserves held in currencies of Western economies amounts to a crippling financial blow, especially to an economy like Russia’s that relies to such a large extent on export revenues.”

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