The United States and its allies have imposed sanctions on Russia’s central bank and sovereign wealth funds, effectively freezing their assets and banning dealings with the Russian financial institutions in the latest western move to punish Moscow for its invasion of Ukraine.
The US Department of the Treasury said on Monday the sanctions will deprive Russian President Vladimir Putin of funds he needs for the war in Ukraine.
“The unprecedented action we are taking today will significantly limit Russia’s ability to use assets to finance its destabilizing activities, and target the funds Putin and his inner circle depend on to enable his invasion of Ukraine,” Secretary of the Treasury Janet Yellen said in a statement.
A senior US administration official told reporters on the condition of anonymity that freezing the central bank’s assets will weaken Russia’s ability to keep its currency afloat amid sanctions targeting its banking system and economic activity.
“Putin’s war chest of $630bn of reserves only matters if he can use it to defend his currency, specifically by selling those reserves in exchange for buying the rouble,” the official said. “After today’s action, that will no longer be possible and ‘Fortress Russia’ will be exposed as a myth.”
The Treasury also said in a statement that the sanctions will “disrupt Russia’s attempts to prop up its rapidly depreciating currency by restricting global supplies of the ruble and access to reserves that Russia may try to exchange to support the ruble”.
The move was taken in coordination with allies, the US government said. The United Kingdom, European Union and Canada also announced their own penalties against Russia’s central bank.
“This has never been done before at this scale – today we are taking a historic step by directly censuring Russia’s central bank,” Chrystia Freeland, Canada’s minister of finance, said in a statement on Monday.
“Canada is firmly on the side of the heroic resistance of the people of Ukraine and we will continue to take further action to ensure President Putin does not succeed.”
Effective immediately, all Canadian financial institutions are prohibited from engaging in transactions with the Russian Central Bank – eliminating its ability to deploy Russia’s international currency reserves and further restricting Putin’s ability to finance his war of choice.
— Justin Trudeau (@JustinTrudeau) February 28, 2022
Monday’s measures came a day after Washington and its partners cut off key Russian banks from the SWIFT financial messaging system, a network that enables international money transfers.
Russia launched an all-out invasion of Ukraine last after a months-long standoff in the region that saw Moscow amass as many as 200,000 troops near the Ukrainian border.
Russia initially denied US and European allegations that it was planning to invade Ukraine, insisting that it has legitimate security concerns about Kyiv’s deepening alliance with the West – and demanding guarantees that Ukraine will not be allowed to join NATO.
Numerous rounds of talks between Russian, European and American officials had failed to end the impasse.
Fighting has been intensifying across Ukraine during the past days, with Russian troops closing in on major cities, including the capital Kyiv and Kharkiv. More than 500,000 people have already fled Ukraine since Russia launched its offensive, the United Nations said on Monday.
Ukraine’s health ministry said on Sunday that 352 civilians, including 14 children, have been killed since the start of the war.
Russian and Ukrainian officials began talks at the Belarusian border on Monday, with Kyiv demanding an immediate ceasefire and withdrawal of Russian troops.