A20 EZ RE THE WASHINGTON POST.TUESDAY, MARCH 1 , 2022
russia invades ukraineUniversity. “The Russians won’t
be able to defend the currency
easily, and its value will tank.”
Some critics have wondered
how Putin may react to the attack
on Russia’s economy. Mark Weis-
brot, a liberal economist and a
director at the Center for Eco-
nomic and Policy Research, said
putting sanctions on the reserves
could lead to an “economic col-
lapse.”
“The Biden administration
needs to de-escalate this conflict
and move toward a diplomatic
solution before it is too late,”
Weisbrot said. “[Ukrainian Presi-
dent Volodymyr] Zelensky wants
to negotiate without precondi-
tions; Washington should do the
same.”
But the senior administration
officials defended their strategy
as a necessary response to Putin’s
aggression. They also said they
are closely monitoring potential
support by Belarus for the war
effort, which may trigger sepa-
rate economic restrictions on
that country.
Adam Smith, a partner at Gib-
son Dunn and a former sanctions
official in the Obama administra-
tion, said the attack on Russia’s
central bank reflects just how
quickly events have moved in
Eastern Europe. Smith empha-
sized that such moves have typi-
cally been off the table because
central banks play such a crucial
role in a nation’s economy, noting
that going after them includes
“severe and potentially unknow-
able collateral effects.” In this
case, Smith said, it’s possible the
sanctions will make it more diffi-
cult for Europe to buy oil and gas
while also hurting the average
Russian economically.
“It has historically been viewed
as almost beyond the pale — the
thing to do when sanctions, and
diplomacy, have been seemingly
exhausted,” Smith said. “That the
international community was
willing to go this far, and suffer
the consequences of doing so ...
suggests just how far this crisis
has gone in just its first week.”Mary Ilyushina, Jeanne Whalen,
Steven Mufson and Cat Zakrzewski
contributed to this report.tions targeting nearly 80 percent
of the Russian banking sector’s
total assets. Its steps include cut-
ting Russia’s largest bank off
from the U.S. financial system, in
addition to restricting access to
technology that could be used to
help Russian companies. U.S.
sanctions have also targeted
members of Putin’s inner circle
and other business leaders in
Russia.
The effect has been dramatic.
The S&P credit rating agency has
downgraded Russia’s debt to junk
status, making it even more ex-
pensive for Russia to borrow
money and forcing some inves-
tors to unload the debt.
Putin’s bank reserves were in-
tended to buffer the impact of
such a blow. “The steps being
announced will undermine Rus-
sia’s ability to prop up the ruble,”
said Richard Nephew, a senior
research scholar at Columbia32 percent of Russia’s foreign
currency reserves were in euros
and 16 percent were in U.S. dol-
lars, according to its central bank.
About 7 percent were in British
pounds, 13 percent in Chinese
renminbi and 22 percent in mon-
etary gold. The remainder was
held in other currencies.
“In one fell swoop, the U.S. and
Europe have rendered Putin’s war
chest unusable. ... That the U.S.
and Europe have done this in
unified fashion sends a crystal-
clear message that Russia will
face dramatic costs so long as
Putin’s war of aggression contin-
ues,” said Edward Fishman, for-
mer Russia and Europe sanctions
lead at the State Department.
“This action represents a sea
change in U.S. and European
strategy. Just 72 hours ago, a step
like this was unthinkable.”
Even before Saturday, the Unit-
ed States had announced sanc-port for Ukraine in the West, but
they also carry the risk of further
escalating hostilities with Mos-
cow. Putin has responded to
Western statements in recent
days by putting the country’s
nuclear forces on alert. Ukrainian
and Russian officials on Monday
held their first diplomatic talks
since the invasion began, and
they plan to continue discussions
in the coming days.
The banking restrictions are
arguably the most serious form of
economic retaliation yet ap-
proved by Western powers in
response to Russia’s attack on
Ukraine. They are aimed at pre-
venting Putin from using his
nation’s sizable financial reserves
— totaling more than $600 bil-
lion — to stabilize the Russian
economy in the face of other
sanctions and economic mea-
sures imposed by the West.
As of June 30 of last year,“The unprecedented action we
are taking today will significantly
limit Russia’s ability to use assets
to finance its destabilizing activi-
ties, and target the funds [Rus-
sian President Vladimir] Putin
and his inner circle depend on to
enable his invasion of Ukraine,”
Treasury Secretary Janet L. Yellen
said in a statement. “Today, in
coordination with partners and
allies, we are following through
on key commitments to restrict
Russia’s access to these valuable
resources.”
Two senior administration offi-
cials, speaking on the condition
of anonymity to describe the
White House’s announcement,
said Monday that the freeze was
immediately effective and in-
tended to prevent Russia from
recalling its international re-
serves from around the world.
The punishments reflect the
extraordinary outpouring of sup-tral bank. The sanctions also
apply to Russia’s Finance Minis-
try and its sovereign wealth fund.
The U nited States and its allies
were executing a hastily assem-
bled strategy meant to squeeze
Russia’s economy and make it
very difficult for Russian leaders
to tap money.
The restrictions amount to
choking off Russia from the inter-
national financial system.
Private businesses have joined
governments in the isolation of
Russia. Facebook, Google and
YouTube have announced plans
to stop Russian state media out-
lets from monetizing off their
platforms. Twitter announced
Monday it would begin adding
labels to tweets containing con-
tent from Russian state media
websites. Oil giant Shell said
Monday it plans to dump its joint
ventures with Russian gas giant
Gazprom, making it the third
major oil company to announce
such a step. FedEx and UPS have
announced they are halting deliv-
eries to Russia and Ukraine, and
the U.S. and foreign governments
have moved to block much of the
Russian banking system from key
international markets.
The E.U. has also announced it
will shut down airspace to Rus-
sian planes and support
Ukraine’s purchase of weapons.
The U nited States and its allies
have not blocked Russia from
exporting energy, however, as Eu-
rope in particular heavily relies
on Russian gas.
The U.S. government said it
was issuing an exemption allow-
ing “certain energy-related trans-
actions” with the central bank of
Russia, as the West has tried to
continue the flow of Russian en-
ergy exports to sustain the Euro-
pean economy and maintain gas
prices.
The U.S. Treasury Department
also announced sanctions Mon-
day morning on entities tied to
Russia’s sovereign wealth fund,
including its management com-
pany and one of the sovereign
wealth fund’s subsidiaries. It also
put sanctions on the leader of
that management company.
SANCTIONS FROM A
U.S., Western allies’ strategy: S queeze Putin’s economy
ANDREY RUDAKOV/BLOOMBERG NEWS
The headquarters of the Bank of Russia, the central bank, in Moscow. Western allies have taken unprecedented aim at the institution.FLOORING SALE
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