New U.S. Treasury Dept. Sanctions Reportedly Hitting Russia Hard

Recently the US administration slapped federal sanctions on a series of Russian oligarchs and affiliated companies, the latest in a series of diplomatic measures to hit Russia as of late.

The Treasury Department’s Office of Foreign Assets Control (OFAC), in consultation with the Department of State, announced that seven Russian oligarchs and 12 companies they own or control had been designated. An additional 17 Russian government officials affiliated with those businesses were also included on this latest blacklist. The move by OFAC means that those individuals listed will have their assets frozen, and all United States citizens will be generally prohibited from engaging in business with them. Treasury Secretary Steven T. Mnuchin summed up the rationale for these measures in a statement:

“The Russian government operates for the disproportionate benefit of oligarchs and government elites. The Russian government engages in a range of malign activity around the globe, including continuing to occupy Crimea and instigate violence in eastern Ukraine, supplying the Assad regime with material and weaponry as they bomb their own civilians, attempting to subvert Western democracies, and malicious cyber activities.  Russian oligarchs and elites who profit from this corrupt system will no longer be insulated from the consequences of their government’s destabilizing activities.”

In other words, there are a currently a slew of Russian government activities deemed by the US as highly disruptive to global security and or American sovereignty, from which these companies and individuals are benefiting. This is the administration’s way of retaliating.

Outside of the specific implications for US-Russian relations, it's important to view the Treasury Department’s recent decision in the broader context of the current “crackdown” on Russia by the West. The newest OFAC list has come out in the shadow of the poisoning of former British double agent Sergei Skripal and his daughter in Salisbury, England. The attack on Skripal, which has been attributed to Russia by both Britain and the United States as well as other EU countries, has led to a bitter series of diplomatic repercussions. In addition to the expulsion of Russian officials from the UK, the prospect of Russian businessmen losing access to their Britain-based assets seemed as close as ever to becoming a reality judging from statements by the country’s leadership.

At the international level, Russia is being investigated by the Organization for the Prohibition of Chemical Weapons (OPCW) and was also denied from having any participation in its proceedings. More global exposure on Russia’s involvement in the incident is likely to come about in a special United Nations meeting on Skripal’s poisoning, expected to take place in the near future.            

There is clearly a trend developing here. Western nations are now collectively confronting Russia as the international bully they perceive it to be. From the occupation of Crimea, to the bolstering of the Assad regime and its brutal tactics, to the more recent coming to light of Russian meddling in the 2016 presidential elections, Russia has had it coming.

The question now is how this all may or may not spiral out of control. Russia has already responded tit-for-tat by expelling UK diplomats. Will increased action, on a broader scale have the desired effect of bringing Russia to some undefined submission to the West, or will it just trigger more retaliation?

While many observers have been skeptical about how much the sanctions will impact Russian president Vladimir Putin, the fact is these measures are now starting to have a devastating effect on Russian markets. On 9 April, media reported the biggest fall for the Russian ruble in more than three years. The main Russian stock index slumped, and investors began dumping shares in businesses controlled by the individuals recently designated by OFAC. One Russian firm, the aluminum hydropower company EN+ controlled by oligarch Oleg Deripaska, dove 25 percent in value. If these effects continue, these and any future sanctions will become difficult for the Russian government to ignore.  

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