...the [Russian economic] situation deteriorated markedly on Monday, with the Russian central bank raising its key interest rate from 9.5 percent to 20 percent, a move that could be seen as a way to deter people from withdrawing more money from domestic banks. And officials also kept the Moscow stock exchange closed Monday and Tuesday, a step that delayed an even greater flight of money.
...
Under the new [financial] regime, all people in the United States and European Union are banned from trading with Russia’s central bank. The sanctions also apply to Russia’s Finance Ministry and its sovereign wealth fund.
Hoo doggie.
The restrictions amount to choking off Russia from the international financial system.
...
The U.S. and its allies have not blocked Russia from exporting energy, however, as Europe in particular heavily relies on Russian gas.
What if Russia does? Did we think that through?
...
Adam Smith, a partner at Gibson Dunn and a former sanctions official in the Obama administration, said the attack on Russia’s central bank [Let's call it what it is and an "attack" is what it is.] reflects just how quickly events have moved in Eastern Europe. Smith emphasized that such moves have typically 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 unknowable collateral effects.” In this case, Smith said, it’s possible the sanctions will make it more difficult for Europe to buy oil and gas while also hurting the average Russian economically.
So no, we did not think that through.
...
Two senior administration officials, speaking on the condition of anonymity to describe the White House’s announcement, said Monday that the freeze was immediately effective and intended to prevent Russia from recalling its international reserves from around the world.
The punishments reflect the extraordinary outpouring of support for Ukraine in the West, but they also carry the risk of further escalating hostilities with Moscow. Putin has responded to Western statements in recent days by putting the country’s nuclear forces on alert.
The banking restrictions are arguably the most serious form of economic
retaliation yet approved by Western powers in response to Russia’s
attack on Ukraine. They are aimed at preventing Putin from using his
nation’s sizable financial reserves — totaling more than $600 billion —
to stabilize the Russian economy in the face of other sanctions and
economic measures imposed by the West.
“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 continues,” said Edward Fishman,
former 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.”
Putin’s bank reserves were intended to buffer the impact of such a blow. “The steps being announced will undermine Russia’s ability to prop up the ruble,” said Richard Nephew, a senior research scholar at Columbia University. “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 Weisbrot, a liberal economist and a director at the Center for Economic and Policy Research, said putting sanctions on the reserves could lead to an “economic collapse.”
“The Biden administration needs to de-escalate this conflict and move toward a diplomatic solution before it is too late,” Weisbrot said.
Isn't it already too late? Even if we had the will to negotiate, what is our strategic goal in the negotiations? As I asked apocryphally in an earlier post, what if Russia agreed to leave Ukraine tomorrow if we remove all of these sanctions? Do we accept? They are not going to leave tomorrow of course, and the point is even if they did we would not remove the sanctions. Then two months from now when Russia gets its money back it re-invades.
“It has historically been viewed as almost beyond the pale [Like resorting to nuclear weapons, Mark?] — 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.”
Ah, that's the rub, isn't it? Did we willingly, knowingly and intelligently--not emotionally--sign up to "suffer the consequences"? The answer is no. And if Putin shuts off gas to Europe the U.S. can't make up the difference. Think OPEC will give Europe a break on prices? Hmm, I wonder!. So we tank Russia's economy, Russia tanks Europe's economy, that tanks the American economy and voila China rules the world!
