US cuts Russia’s central bank from dollar transactions

The United States is taking immediate steps on Monday to ban U.S. dollar transactions with the Russian central bank and block the Russian direct investment fund entirely, senior administration officials said — an aggressive move aimed at some of the most Russia’s powers to mitigate the effect of sanctions.

The aim is to prevent Russia from accessing a “hard days fund” that Moscow had hoped to have during its invasion of Ukraine, officials said. Instead of using the reserves to cushion a falling ruble, Russia will no longer be able to access the funds it holds in US dollars.

The new, sweeping sanctions — taken with Germany, France, the United Kingdom, Italy, Canada, the European Union and others — come amid the Russian economy’s free fall. On Monday, the ruble fell by 30%, a record for the local currency, and the central bank raised the benchmark interest rate from 9.5% to 20%.

“No country is sanctions-proof,” said a White House official. “Putin’s war chest of $630 billion in reserves is only important if it can be used to defend the local currency, specifically selling those reserves in exchange for buying the ruble.”

“After today’s actions, this will no longer be possible, and Russia’s stronghold will be exposed as a facade.”

In a phone call with reporters Monday morning, a senior government official said the move was “the culmination of months of planning and preparation by our respective governments in technical, diplomatic and political channels, including at the highest levels.”

“We were ready and that’s what allowed us to act within days, not weeks or months, of Putin’s escalation,” the official said.

“Our strategy, to put it simply, is to ensure that the Russian economy pulls back as long as President Putin decides to go ahead with his invasion of Ukraine,” said a second senior government official.

In an attempt to mitigate the impact of sanctions on US and European energy consumers, the Treasury Department will exempt most energy-related transactions from sanctions, a significant cut in sanctions.

One official called the ongoing sanctions a “vicious feedback loop that is triggered by Putin’s own choices and accelerated by his own aggression.”

The sanctions also totally block the Russian Direct Investment Fund and its CEO, Kirill Dmitriev. Officials said they were “symbols of deep-rooted Russian corruption and influence peddling globally”.

“Today’s actions represent the most significant actions the US Treasury has taken against an economy of this size and assets of this size,” another official said.

“What also makes this asset significant is not just the amount of assets or the size of the country we are targeting, but the speed with which our partners and allies have worked with us to enact this response.”

Asked about possible additional sanctions on Belarus, which appears poised to elevate its role in Russia’s invasion of Ukraine, an official said the US is watching events “very carefully” and that sanctions on Belarus will “continue to escalate much further.” .

In update.