From the MT:
“Explainer: Why Is the U.S.
Sanctioning Russia and What Impact Will it Have?”
The U.S. on Thursday hit Russia
with its toughest set of sanctions since 2018 to punish the Russian government
for a host of infringements. This is the first sanctions action against Russia
taken by new president Joe Biden and comes days after he suggested a
face-to-face summit with his Russian counterpart Vladimir Putin, as a military
stand-off in eastern Ukraine continues to simmer. U.S. Secretary of State
Antony Blinken said the sanctions “are intended to hold Russia to account for
its reckless actions.” Treasury Secretary Janet Yellen called the new sanctions
“sweeping” and said they were introduced to “confront Russia’s continued and
growing malign behavior … and impose costs on the Russian government for its
unacceptable conduct, including by limiting Russia’s ability to finance its
activities and by targeting Russia’s malicious and disruptive cyber
capabilities.”
What has the U.S. announced? U.S.
financial institutions will be banned from taking part in new Russian
government bond auctions from June 14. The U.S. expelled 10 diplomats from the
Russian embassy in Washington D.C., a group it alleges “includes
representatives of Russian intelligence services.” The U.S. sanctioned 32 other
individuals and legal entities it deemed responsible for “carrying out Russian
government-directed attempts to influence the 2020 U.S. presidential election,
and other acts of disinformation and interference.” They will not be able to
travel to the U.S. and any assets based in the U.S. will be frozen. Among the sanctioned outfits were a host of
entities controlled by “Putin’s Chef” Yevgeniy Prigozhin, who was recently
added to the FBI’s wanted list and is linked to the Wagner private militia
group which has been deployed to various conflicts in Africa, Syria and eastern
Ukraine. Three companies involved in constructing the Kerch bridge, which links
Crimea to Russia were sanctioned, as well as five Crimean government officials,
including the head of the FSB security agency and the Investigative Committee
on the peninsula. Six Russian technology companies with links to Russia’s
Defense Ministry were also sanctioned for “developing tools and infrastructure
to facilitate malicious cyber activities.” The U.S. “formally named” Russia’s
foreign intelligence service (SVR) — “also known as APT 29, Cozy Bear, and The
Dukes” — as responsible for the SolarWinds cyber attack, described by the
president of Microsoft as the most sophisticated and advanced hack in history.
It follows earlier official comments that the U.S. believed Russia was “likely
responsible” for the cyber attack. No new measures against the controversial
Nord Stream 2 pipeline were announced. Assets of sanctioned individuals which
are located in the U.S. are automatically frozen and they are barred from
travelling to the U.S. American firms
and individuals are also barred from conducting business transactions with
people and businesses on the sanctions list or any companies or entities they
control.
What is the reason? The
sanctions relate to a wide range of alleged Russian transgressions, including
those the U.S. says were undertaken during the Trump administration. The
U.S. said its actions were in response to Russia’s “efforts to undermine the
conduct of free and fair democratic elections and democratic institutions in
the United States ... engage in and facilitate malicious cyber activities
against the United States ... foster and use transnational corruption to
influence foreign governments … pursue extraterritorial activities targeting
dissidents or journalists, undermine security in countries and regions
important to United States national security and violate well-established
principles of international law.” The U.S. said the sanctions
demonstrate it “will impose costs in a strategic and economically impactful
manner on Russia if it continues or escalates its destabilizing international
actions. Specifically, the sanctions are tied to Russia’s annexation of Crimea
in 2014, interference in the 2020 U.S. election and the cyber attack on
SolarWinds, although they come against a background of increased hostility
between Russia and the West over a wide range of other issues The U.S.
explicitly mentioned the poisoning and jailing of Kremlin critic Alexei Navalny
in its statement. More sanctions are expected to be handed down later this year
in response to what the U.S. has determined was Russia’s illegal use of
chemical weapons in poisoning Navalny with a nerve agent last August. In
their explanation of the new sanctions, U.S. officials also mentioned they were
“responding” to reports that Russia had offered bounties to local fighters to
kill American soldiers in Afghanistan. No specific measures were levied in
response, but the U.S. said it was dealing with the reports through
“diplomatic, military and intelligence channels,” and the recognition that it
takes the reports seriously marks a reversal from the Trump administration, who
failed to address them publicly.
What impact will it have? This
is the most wide-ranging and potentially hard-hitting round of sanctions
introduced against Russia since 2018. However, Russia has rolled out a host of
sanctions-proofing measures since it was first punished by the international
community in 2014 for the annexation of Crimea, and the economy is
significantly more shielded than during previous rounds of sanctions. Sanctioned
individuals and businesses are unlikely to have any significant assets
vulnerable to U.S. freezes, and the blocks on Russia’s sovereign debt fall
short of the so-called “nuclear option” of a complete ban on Western financial
outfits having anything to do with Russian state debt. There were also no measures targeting
Russia’s oligarchs and business elites, as Navalny and his team have called for
the west to introduce. The ruble fell 2% against the U.S. dollar and the euro
when news first emerged Thursday morning that the U.S. was about to announce a
far-reaching sanctions package. The currency slightly recovered, but is still trading near five-month lows at 76.7 against
the dollar, and 91.7 against the euro. The block on sovereign debt has
been watered down from other possibly stronger options that could have been
announced, said Maria Shagina, a member of the Geneva International Sanctions
Network. It targets “the new issuance of bonds only,” she said, and also takes
a “narrow definition” of what qualifies as sovereign debt, not covering Russian
state-controlled companies, for instance and only covering primary issues. “The
sanctions target both ruble & non-ruble debt — slightly different from
Trump's sanctions — but can be circumvented through the secondary market,” she
added. In any case, Russia is not reliant on international investors to
raise capital. In 2020, non-residents purchased only $5 billion of the $73
billion issued in government bonds, and their share of outstanding government
debt has fallen to its lowest level in five years, below 20%. “Fundamentally,
a ban on foreign participation in new bond issues is not a threat to Russia’s
financial stability as the state debt is low, around 20% GDP, [and] local banks
with $1.5 trillion of assets have the balance sheet capacity to absorb the
Finance Ministry’s placement appetite,” said ING’s chief Russia economist
Dmitry Dolgin. “The U.S. sanctions on primary [debt] is an important
warning shot, but [they are] clearly not ready to give away the last chips,”
said Elina Ribakova, deputy chief economist at the Institute for International
Finance, referencing possible stronger moves such as a ban on all buying and
selling of government debt, as well as targeting Russia’s participation in the
Swift international payments system.
How has Russia reacted? Russia has hit out at the imposition of
sanctions, warning their introduction is not conducive to the proposed Biden-Putin
summit going ahead in the near future. Russia immediately summoned U.S.
Ambassador John Sullivan to the Foreign Ministry for what spokesperson Maria
Zaharova said would be “a difficult conversation.” Russia typically
responds to diplomatic expulsions in a tit-for-tat move, and is expected to
expel 10 American diplomats from the U.S. embassy in retaliation. The Foreign
Ministry said Thursday a Russian response was “inevitable.” Yevgeny
Prigozhin said he was being sanctioned for his “humanitarian actions” in
Africa.
^ These sanctions needed to be
done. I’m sure Russia will respond in kind. ^
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.