US freezes Russian central bank assets in significant escalation of sanctions

The United States has moved to cut off Russia from the global economy by blocking transactions with the country’s central bank, a significant escalation of sanctions against Moscow just days after Russia launched military action in Ukraine.

The Treasury Department imposed the new sanctions on Monday, effectively cutting the Central Bank of Russia from the US dollar and barring Americans from engaging in any transactions with it.

The penalties, which also target Russia’s foreign investment fund and finance ministry, would drive Russian inflation higher, diminish its purchasing power and negatively impact investments in the country, US officials said.

The moves are meant to block Russia’s access to its international reserves that US officials say President Vladimir Putin might use to blunt the impact of sanctions that the United States and European allies have already imposed on Moscow.

“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 L. Yellen said in a statement.

Russia has spent the last several years bolstering its defenses against sanctions, diverting $643 billion of its oil and gas revenues into foreign reserves.

China decries Russia sanctions as 'illegal'; urges parties to show restraint

China has denounced sanctions imposed by the Western countries against Russia over the military operation in Ukraine as “illegal”, blaming Washington for escalating tensions between the two former Soviet neighbors.

As a result of the new sanctions, Russian central bank assets that are held in US financial institutions are frozen and financial institutions outside the United States are banned from moving dollars for the Russian central bank.

“Our strategy, to put it simply, is to make sure that the Russian economy goes backwards as long as President Putin decides to go forward with his invasion of Ukraine,” a senior Biden administration official told reporters on Monday.

The announcement of the new sanctions caused the Russian currency, ruble, to drop more than 30 percent against the dollar Monday and prompted the Russian central bank to raise its baseline interest rate.

The Treasury Department, however, said it would make exceptions for transactions related to Russia’s energy exports in order to prevent a sharp spike in global oil and natural gas prices.

The carve-out means that energy payments will continue to flow, mitigating risks to global energy markets and Europe, which is heavily dependent on Russian oil and gas exports.

Biden claims alternative to huge anti-Russia sanctions is World War III

US President Joe Biden tries to bolster huge but yet ineffective Western sanctions against Russia over its military operation in Ukraine, by claiming the only alternative would be to start a “Third World War.”

US President Joe Biden has previously defended his decision to preserve access to Russian energy in an attempt to “to limit the pain the American people are feeling at the gas pump.”

On Thursday, Putin announced a “special military operation” aimed at “demilitarization” of the Donetsk and Lugansk Republics in eastern Ukraine.

The regions broke away from Ukraine in 2014 after refusing to recognize a Western-backed Ukrainian government that had overthrown a democratically-elected Russia-friendly administration.

Talks between Russian and Ukrainian officials began on the Belarusian border on Monday.

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