WASHINGTON — Since Russia invaded Ukraine on Feb. 24, the United States and its allies have enacted the harshest sanctions ever imposed on a major power, targeting Moscow’s largest financial institutions as well as foreign reserves, its primary exports, its richest citizens and top government officials.
What makes these sanctions so effective is the continued dominance of the U.S. dollar in global financial transactions along with Washington’s ability to coordinate them with an alliance of nations that, together with the United States, make up half the global economy.
And the sanctions keep coming. The United States and Britain have announced new, coordinated sanctions on a near-weekly basis, and the European Union is currently working toward a ban on all imports of Russian oil.
“The simple way of thinking about it is, Russia sells commodities — half of which are energy — and then they take those revenues to buy manufactured goods or high-tech goods,” said Gerard DiPippo, a senior fellow with the Economics Program at the Center for Strategic and International Studies. “We’re theoretically trying to cut them off on both sides. It’s harder to cut them off at the revenue source.”
Put simply, sanctions on Russia fall into four buckets. The United States and its allies keep filling each of them with new tools.
The hardest-hitting sanctions so far have targeted Russia’s most important financial institutions.
These sanctions are run out of the Office of Foreign Assets Control, or OFAC, a financial intelligence and enforcement agency based at the U.S. Treasury Department, and restrict certain or all transactions by Americans with designated entities.
The most significant designation so far was the Central Bank of Russia. In a coordinated effort, the United States, European Union and Great Britain froze virtually all of Russia’s foreign exchange reserves — essentially, its safety deposit box held in reserve for a moment of crisis — affecting all of their holdings except for Chinese currency and gold.
The United States, European Union, Britain and Canada have also compelled the ubiquitous SWIFT financial messaging system to cut off access to several major state-owned Russian banks, which effectively prevents them from conducting most financial transactions.