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US unveils biggest sanctions package on Russia since war began

Daniel Flatley, Bloomberg News on

Published in News & Features

The U.S. unveiled its biggest one-day sanctions package against Russia since the invasion of Ukraine two years ago, targeting more than 500 people and entities in a fresh bid to squeeze the country’s economy and send a message over the death of dissident Alexey Navalny.

Sanctioned people and entities included a military drone manufacturer and its top staff, Russia’s Mir payment system, a company that specializes in three-dimensional printed plastics and numerous others. The Commerce Department added 90 companies to a list that limits their access to U.S. technology.

“Russia’s economy and military-industrial base are showing clear signs of weakness in part due to the actions we, along with our partners and allies around the world, have taken to support Ukraine’s brave defense,” Treasury Secretary Janet Yellen said in a statement.

The U.S. has already imposed sweeping sanctions affecting whole swaths of Russia’s economy and prominent oligarchs following the invasion of Ukraine. It’s acted in concert with European allies, which have also imposed about a dozen sanctions packages in a complementary bid to punish President Vladimir Putin and crimp his forces’ ability to wage war.

Yet through it all, the Russian economy has avoided collapse and Putin has managed to defy early predictions from some U.S. officials that the pain imposed by sanctions would be so great that he might be driven from power or be forced to retreat from Ukraine.

Though the Russian economy shrank initially and the ruble fell, the country eventually recovered and is projected to grow by 2.6% this year, according to the International Monetary Fund. Even so, some experts believe that Russian GDP will be about 10% lower in 2030 than it would have been otherwise.

None of the people or entities targeted Friday were especially well known. That highlighted how the U.S. and European nations have already imposed harsh penalties and export controls on the most significant sectors of the Russian economy in the days after the invasion.

That includes freezing the country’s central bank assets and cutting several of its banks off the Swift financial messaging system. A price cap on Russian oil was introduced in the summer of 2022 and implemented in December of that year, targeting Putin’s most lucrative commodity.

 

At the same time, the U.S. has held off a more severe clampdown on Russian oil sales for fear of causing a surge in crude prices — a politically perilous scenario during an election year. The U.S. has also resisted singling out Russia’s metals sector. In 2018, aluminum surged in response to sanctions imposed on Russians including United Co. Rusal International PJSC. Those sanctions were later unwound.

Russia has also managed to defy the oil price cap, finding willing buyers among allies such as China. Other nations including North Korea and Iran have kept it supplied with munitions to press ahead with the fight in Ukraine.

At the same time, support for Ukraine is wavering the U.S. A bill to provide Ukraine another $60 billion in weapons and munitions is stalled in the House of Representatives, with Republican lawmakers refusing to let it go ahead. Former President Donald Trump, the presumptive Republican nominee for the 2024 presidential election, has come out strongly against it, leading many of his supporters in Congress to abandon it.

The U.S. will also take further action to enforce the price cap, Deputy Secretary Wally Adeyemo was set to say in a speech at the Council on Foreign Relations later Friday.

“In order to pay for this brutal war, the Kremlin is mortgaging the future of the Russian people,” Adeyemo will say, according to his prepared remarks. “While GDP is higher than projected, it’s largely due to the 70 percent increase in military spending, which has driven inflation higher and has taken the place of critical investments in Russia’s people and future.”

The sanctions also target companies that provide optics, navigational instruments, software and hardware to the Russian military.

A handful of Chinese companies, primarily microelectronics firms, were also sanctioned. Adeyemo said in a call with reporters that while U.S. officials continue to engage with the Chinese government to try to curtail these shipments, they have increasingly gone to the companies themselves and offered them a choice between doing business with Russia or doing business with the U.S.


©2024 Bloomberg News. Visit at bloomberg.com. Distributed by Tribune Content Agency, LLC.

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