Better late than never? The US Treasury imposed a block on any assets from Russia’s Central Bank in the US, as well as any in a sovereign fund run by a Vladimir Putin crony. It is, as the New York Times reports, an “aggressive” move, but one has to wonder whether it’s too late:
The Treasury Department on Monday moved to further cut off Russia from the global economy, announcing that it would immobilize Russian Central Bank assets that are held in the United States and impose sanctions on the Russian Direct Investment Fund, a sovereign wealth fund that is run by a close ally of President Vladimir V. Putin.
The moves are meant to curb Russia’s ability to use its war chest of international reserves to blunt the impact of sanctions that the United States and European allies have enacted in response to Russia’s invasion of Ukraine.
“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.
As a result of the sanctions, Americans are barred from taking part in any transactions involving the Russian Central Bank, Russia’s National Wealth Fund or the Russian Ministry of Finance.
Wouldn’t Putin have already moved those assets out of reach of the US and the EU? Maybe not:
The White House says they are announcing this decision before US markets open after learning from allies that the Russian central bank was attempting to move assets and there would be “a great deal of asset flight” this a.m.
— Kaitlan Collins (@kaitlancollins) February 28, 2022
Supposedly, Putin planned to use these funds as “rainy day” capital to fund his war efforts in Ukraine. One has to wonder, though, whether the intent was to use them as a payoff purse to keep his oligarch class behind him when the rainy day turned into a Biblical flood. CNBC’s description of the sovereign fund certainly gives off that smell:
The U.S. is also adding Kirill Dmitriev, another ally of Russian President Vladimir Putin, to the sanctions list as well as the direct investment fund Dmitriev heads. The Russian Direct Investment Fund, or RDIF, is officially a sovereign wealth fund but is widely considered a slush fund for Putin.
The official said that the U.S. expects its allies to take similar steps in the coming days.
This comes after the U.S. and its allies announced over the weekend that they will impose restrictive measures aimed at preventing Russia’s central bank from deploying its international reserves in ways that may undermine sanctions.
“No country is sanctions proof and Putin’s war chest of $630 billion in reserves only matters if he can use it to defend his currency,” a second senior administration official said Monday.
If war is diplomacy by other means, then sanctions is warfare by other means of destruction. What happens to Putin when he can’t buffer the oligarchs from the economic pain of sanctions he invited with his weird, payoff-deficient attack on Ukraine? Putin will either need to retreat, which carries existential risks all its own, or hope to sack Ukraine quickly and hope the West loses interest in Ukrainian oppression. The third option belongs to the oligarchs and/or the Russian people, and Putin knows that well enough.