The US is taking immediate action on Monday to prohibit American dollar transactions with the Russian central bank and fully block the Russian direct investment fund, senior administration officials said, an aggressive move that aims at some of Russia’s most powerful means of mitigating the effect of sanctions.
The steps are meant to prevent Russia from accessing a “rainy day fund” that officials said Moscow had been expecting to rely upon during the invasion of Ukraine. Instead of using the reserves to buffer a plummeting ruble, Russia will no longer be able to access the funds it keeps in US dollars.
The sweeping new sanctions – taken with Germany, France, the UK, Italy, Canada, the European Union and others – come as Russia’s economy is already in freefall.
“No country is sanction proof,” a White House official said. “Putin’s war chest of $630 billion in reserves only matters if you can use it to defend his currency, specifically by selling those reserves in exchange for buying the ruble.”
“After today’s actions that will no longer be possible, and fortress Russia will be exposed as a myth.”
In a phone call with reporters Monday morning, a senior administration official said the move was “the culmination of months of planning and preparation across our respective governments across 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 make sure that the Russian economy goes backward as long as President Putin decides to go forward with his invasion of Ukraine,” a second senior administration official said.
In a bid to mitigate the impact of the sanctions on US and European energy consumers, the Treasury Department will exempt most energy-related transactions from the sanctions, a significant carve-out in the sanctions.
One official called the ongoing sanctions a “vicious feedback loop that’s triggered by Putin’s own choices and accelerated by his own aggression.”
The sanctions also fully block the Russian Direct Investment Fund and its CEO, Kirill Dmitriev. Officials said they were “symbols of deep seated 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’re targeting, but the speed at which our partners and allies have worked with us to enact this response.”
Asked about potential 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 would “continue to ratchet much higher.”
Battles have continued Monday near several key Ukrainian cities as Russia presses further into the country. Russian forces are facing “stiff resistance” with slowing momentum in northern Ukraine, a US defense official said, while invading troops are having a “little bit more success” in the south.
Russian forces have “slowed their offensive” but are “still trying” to take Ukrainian ground around the country, according to the Ukrainian military.
Talks between Russian and Ukrainian delegations also got underway Monday in Belarus. In the lead-up to the meeting, Ukraine demanded an “immediate ceasefire and withdrawal of Russian troops.”
More than 500,000 refugees have fled Ukraine to neighboring countries after the beginning of the invasion, the United Nations Refugee Agency said Monday.
Ukrainian President Volodymyr Zelensky has asked European countries to do more to support his nation and on Monday asked the European Union to “urgently admit Ukraine” to the bloc.
A new CNN poll shows Americans overwhelmingly support increased economic sanctions against Russia and broadly support further action to stop Russia’s invasion of Ukraine, but most oppose direct US military action. Eighty-three percent of Americans said they favored increased economic sanctions against Russia in response to the invasion, with just 17% opposed.
This story has been updated with additional information.