By ELLEN KNICKMEYER – Associated Press
WASHINGTON (AP) — U.S. President Joe Biden on Thursday imposed some of the biggest and harshest fines the world’s largest economy can muster on Russia, hours after President Vladimir Putin launched his military’s invasion of Ukraine.
The US sanctions and penalties announced so far seem to spare Putin himself sanctions. They also forego what has long been called one of the most difficult options, refraining from banning Russia from the SWIFT financial system, which moves money around the world. Biden cited concerns from European allies.
But the steps taken by the United States on Thursday are powerful nonetheless, aimed at crippling Russia’s financial system, its elites and all of Russia’s hopes for economic growth. Here’s a look at the financial retaliation the US has announced against Russia’s largest state-owned banks and corporations, its industry, its economy and some of its most powerful people, as well as key measures the US is still holding back.
CUT-OFF OF RUSSIAN BANKS FROM US DOLLARS
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Thursday’s sanctions are targeting large Russian banks, which now hold 80% of the country’s total bank assets, the finance ministry said.
These include the two largest in Russia: state-owned SberBank and VTB. Together they hold nearly $750 billion in assets, the US said, accounting for more than half of Russia’s total.
Thursday’s sanctions on banks exercise the unique power the US has through the dollar, the currency of choice in doing business around the world.
The attacked banks typically trade in tens of billions of dollars in dollars on a daily basis. The US is now cutting them off from the US financial system and the US dollar. The aim is to make the simplest business affairs, as well as international trade, significantly more difficult for banks and Russia.
Other US measures target key state-owned and private companies in Russia to make it harder for them to raise money to invest and operate.
The US also went after more Russian elites, sanctioning bankers and other powerful Putin allies in Russia’s top financial, political and security circles.
HAVING RUSSIAN COMPANIES, US HIGH-TECH MILITARY
The export controls announced by the Biden administration provide another particularly powerful lever that the US holds – America’s semiconductors and other advanced high-tech equipment.
Biden said new US export restrictions would deprive Russia of more than half of its current high-tech supply. It will “deal a blow” to Russia’s goals of modernizing its military, its vaunted aerospace industry, space program, shipping and other industries, he said.
By “reducing their economic competitiveness,” the high-tech frontiers will deal a “major blow to long-term strategic ambitions,” Biden said.
US export controls are expected to strip Russian industry and the military of the high-tech US components that help fighter jets and airliners fly and make smartphones smart, along with other software and advanced electronic gear that make the modern world run bring.
The US said the European Union, Japan, Britain and other countries are also working together to starve Russia of high-tech components.
The US response could add Russia to the most restrictive group of countries for export control purposes, joining Cuba, Iran, North Korea and Syria.
They limit Russia’s ability to obtain integrated circuits and products containing integrated circuits due to global dominance of US software, technology and equipment. The impact could extend to aircraft avionics, machine tools, smartphones, gaming consoles, tablets and televisions.
However, US export restrictions would risk motivating companies to look elsewhere, including China.
STEPS THE US HAS NOT TAKE – OR NOT YET
Biden says sanctions on Russia are tailored not to disrupt global oil and natural gas markets. This is at a time when oil supply and high prices are making life difficult for governments and consumers around the world. The Biden administration itself is under political pressure from rising oil and gas prices.
“Our sanctions package is specifically designed to allow energy payments to continue,” Biden said in his White House address on Thursday.
Russia is one of the world’s largest oil and gas exporters. Germany and other allies are heavily dependent on its supplies, despite the big strides some are making in moving away from fossil fuels. The Biden administration has stressed that it is careful to minimize the impact of sanctions on these allies.
Biden also cited European concerns about the US decision to continue to withhold proposals to ban Russia from the SWIFT financial system, which moves money from bank to bank around the world.
Leading politicians in Germany, with its numerous business relationships with Russia, had publicly expressed their skepticism about a ban on SWIFT.
Biden told reporters Thursday his banking sanctions would hit Russia even harder than a SWIFT ban. Some financial experts agree, saying the bank sanctions could also be less disruptive to global financial systems than ripping Russia out of the SWIFT system would be.
And Treasury Secretary Janet Yellen made it clear that the US could still impose some penalties that it is currently holding in reserve.
The individual sanctions announced by the United States also spared the key player in a Russian invasion that has shattered the safety nets of Europe and the world – Putin himself. Individual European sanctions also appear to be sparing Putin.
US and European officials did not immediately explain their reasoning in it. Biden has expressed a reluctance to sanction heads of state in the past. Fears that Putin’s fortune and family could be directly targeted could also have played a role.
But when asked by reporters to explain the move Thursday did not take, Biden pointedly refused to answer.
Associated Press writers Fatima Hussein in Washington and Ken Sweet in New York contributed to this report.
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