The Importance of US Sanctions in The Russia-Ukraine Crisis

Blog / US Sanctions Impact on Russia-Ukraine Crisis

Russia's offensive against Ukraine on February 24 had severe repercussions in the international arena. America, like other countries, announced the sanctions one by one, with Russia's recognition of the separatist regions and sending peacekeepers. US President Biden has announced that he will impose more serious sanctions more swiftly as Russia's aggressive attitude continues. With Russia's entry into Ukraine, the US Treasury Department announced wide-ranging sanctions to shake Russia.

Russia became the most sanctioned country in the world, and the measures its government took to respond.

New Sanctions Announced by OFAC

America took steps to inflict severe damage to the Russian economy and financial system both in the short term and in the long run and imposed new sanctions that would cause heavy consequences for the war effort. OFAC, along with its allies, enacted economic sanctions to undermine all of Russia's largest financial institutions, including state institutions' ability to disable the Russian economy and finance. While these actions carried out by OFAC target approximately 80 percent of the banking assets in Russia, they aim to cut off Russia's relationship with the global market.

The newly announced sanctions will undermine Russia's ability to raise financial capital, which is the basis of its aggressive stance. It aims to break the Kremlin's ability to project power, not just now but in the future. At the same time, while this action will ease the pressure on the allies, it will add serious weight to Russia's economy. Today's actions were carried out in accordance with executive order 14024.

Economic Sanctions

The US sanctions target two of Russia's largest financial institutions, the Public Joint Stock Company Sberbank of Russia and VTB Bank Public Joint Stock Company. Daily, Russian financial institutions process approximately $46 billion in foreign exchange transactions globally, 80 percent of which are in US dollars. These two big banks are on target as they make up more than half of the total banking system in Russia. It will no longer benefit from the US financial system by preventing these two banks from processing payments through the US financial system. At the same time, Sberbank correspondent and accounts payable sanction, which is very important for Russia and has the largest market for savings deposits in the country and holds about one-third of all bank assets, has also been implemented. 

OFAC requires US Financial institutions to close and reject all Sberbank correspondents and payable-through accounts within 30 days.

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Transactions will be canceled unless authorized by OFAC or exempted under EO 14024.

A full blocking sanction was imposed on VTB, which holds 20% of the banking assets of the second largest, Russia. Accounts will be frozen instantly, and the Kremlin will not be able to access them. 20 VTB bank subsidiaries owned and controlled by VTB are subject to blocking even if they are not identified in their affiliated banks, holding companies, and finance companies located in Russia and eight other countries.

Apart from these, sanctions were imposed on three big financial institutions, namely Otkritie, Sovcombank, and Novikombank.

Otrike is considered Russia's state credit institution and is the 7th largest financial institution. Subject to blocking at 12 subsidiaries, directly or indirectly owned or controlled by Otkrite, according to EO14024

Sovcombank is Russia's 3rd largest financial institution and 9th largest bank. Twenty-two subsidiaries of this bank are also subject to blocking.

Novikombank is among the 50 largest financial institutions. In accordance with directive three-under EO13662, the institution already subject to restrictions is blocked.

The sanctions affect the 13 companies listed in the Russian-related penny directive, companies critical to the Russian economy, and the six largest financial institutions. OFAC expands the number of Russian entities subject to new debt and equity-related bans.

OFAC has identified 11 Russian entities that are directly or indirectly controlled or owned by Russia;

  • Sberbank
  • Gazprombank Joint Stock Compan
  • Joint Stock Company Russian Agricultural Bank
  • Public Joint Stock Company Gazprom
  • Public Joint Stock Company Gazprom Neft
  • Public Joint Stock Company Transneft
  • Public Joint Stock Company Rostelecom
  • Public Joint Stock Company RusHydro
  • Public Joint Stock Company Alrosa 
  • Joint Stock Company Sovcomflot 
  • Open Joint Stock Company Russian Railways
  • Joint Stock Company Alfa-Bank
  • Credit Bank of Moscow Public Joint Stock Company

Sanctions Targeting the Elites

  • Families Close to Putin
  • Sergei Sergeevich Ivanov, son of Sergei Borisovich
  • Andrey Patrushev
  • Nikoli Platonovich Patrushevin and his son
  • Son of Igor Ivanovic Sechin Ivan Igorevic Sechin
  • Finance Sector Elite
  • Alexander Alexandrovich Vedyakhin
  • Andrey Sergeyevich Puchkov
  • Yuri Alekseyevich Soloviev and his companies Limited Liability Company Atlant and Liability Company Inspira Invest
  • Galina Olegovna Ulyutina 

The USA joined the EU's decision and put Russian President Putin and Foreign Minister Lavrov on the sanction list. The most important move from the US and EU sanctions against Russia is expected to be removed from the international payment system SWIFT. There is no final decision on this issue yet.

ofac  implements commercial and economic sanctions to support U.S. security and foreign policy

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