The US Treasury is set to expand its secondary sanctions program on Russia this week, targeting any foreign financial institution that deals with sanctioned Russian entities. This move aims to crack down on those who support the Kremlin’s military-industrial base, even indirectly. The number of entities subject to these sanctions will increase from 1,200 to over 4,500, including major Russian banks like Sberbank and VTB. This expansion reflects the US belief that Russia has become a war economy following its invasion of Ukraine.
The implementation of secondary sanctions has already led to a decrease in the flow of war-related imports into Russia, as banks in other countries have become more cautious about dealing with high-risk Russian customers. Emily Kilcrease, a trade and sanctions expert, noted that these sanctions allow the US to enforce its measures on those who are not directly subject to US law. This puts pressure on financial institutions in countries like China, which has been strengthening ties with Russia in recent years.
Russian President Vladimir Putin recently appointed Andrei Belousov as defense minister in a move to make the country’s defense spending more efficient and less susceptible to Western sanctions. This reshuffle comes amidst ongoing tensions surrounding Russia’s involvement in Ukraine. Despite efforts to strengthen financial ties between China and Russia, concerns about potential US secondary sanctions have dampened some aspects of this partnership. The US government has indicated its focus on targeting Chinese companies and financial institutions that support Russia in a systematic manner.
US officials have confirmed plans to announce a new set of sanctions and export controls targeting Russia. Additionally, efforts by G7 countries to utilize frozen Russian sovereign assets will continue. The US National Security Council spokesperson emphasized the importance of these measures in response to Russia’s actions. As the US and its allies ramp up pressure on Russia, the geopolitical implications of these sanctions and export controls remain to be seen.
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