(Washington) The United States implemented Monday a sanction of unprecedented severity against the Russian central bank, which they intend to reduce to impotence in response to the invasion of Ukraine.
Washington has banned with immediate effect any transaction with the Russian monetary institution, announced the Treasury Department before the opening of US markets.
“This decision has the effect of immobilizing all the assets that the central bank of Russia holds in the United States, or which would be held anywhere by American persons”, is it specified in a press release from the American Treasury.
In fact, this decision, in connection with similar sanctions taken by many allies of the United States, will severely limit Moscow’s ability to use its abundant foreign exchange reserves to buy rubles.
Canada followed the lead of the United States in making a similar decision.
“From now on, any Canadian financial institution is prohibited from dealing with the Russian central bank. This prevents him from deploying Russia’s international monetary reserves and further limits Putin’s ability to fund his chosen war,” Canadian Prime Minister Justin Trudeau announced.
Russia had $643 billion in foreign exchange reserves at the end of last week, official data showed, a high level achieved by partly diverting oil and gas revenues.
It is not known, however, how much of Russia’s foreign exchange reserves are held in US dollars, as the Biden administration did not give an estimate.
The new restrictions imposed by the United States and its allies against the sale of rubles to Russia aim to undermine the country’s ability to support its currency in the face of new sanctions imposed on its financial sector.
A defenseless “Fortress Russia”
These operations to defend the Russian currency, which is already collapsing, “will no longer be possible and ‘Fortress Russia’ is left defenseless,” commented a senior official of the American administration during a conference call.
He estimated that these coordinated sanctions would trigger a “vicious circle” for the Russian economy, and predicted: “Inflation will most certainly soar, purchasing power will collapse, investments will collapse”.
“Our goal is to ensure that the Russian economy will shrink as long as President Putin decides to move forward with the invasion of Ukraine,” the senior official said.
The United States also implemented sanctions on Monday against the Russian Direct Investment Fund, a public financial institution used by Russia in particular to raise funds abroad, and run by a close associate of Russian President Kirill Dmitriev.
“This fund and its management are symbols of the deep corruption in Russia and its influence peddling” abroad, estimated the source quoted above.
“It’s an unprecedented sanction,” reacted on Twitter Eddie Fishman, expert at the Atlantic Council, an American think tank, since the Central Bank of Russia can no longer sell foreign exchange reserves.
However, he points out that the large Russian state enterprises also have foreign exchange reserves. “If it is necessary to intensify the sanctions, it is an element to monitor,” he added.
Against Western measures, the ruble collapsed. On Monday, it broke all-time lows against the dollar and the euro.
To defend the economy and the national currency affected by the sanctions, the Central Bank of Russia raised its key rate from 9.5 to 20% on Monday morning.
The Russian Stock Exchange has also remained closed for fear of seeing Russian securities collapse as is the case elsewhere in the world.