While President Biden Waits for Sanctions To Work, President Putin Moves Troops Into Ukraine
The Biden Administration has engaged in a form of hide-and-seek diplomacy with Russia for nearly a year. Then a few weeks after the Administration succeeded in blocking a bipartisan Senate bill leveling sanctions on Russia’s Nord Stream 2 energy pipeline, Russia essentially annexed two regions in Ukraine.
After watching and waiting, but doing little, President Biden finally announced modest sanctions on Russia this week. Although Russia has been massing troops around Ukraine since March 2021, President Biden, hobbled by a contagion of inaction, has now decided to act after seeing Russian troops in Belarus, Russia, and Ukrainian breakaway regions and after they launched a cyberwar and announced their readiness to invade.
While more U. S. sanctions may follow in the coming days, here are the sanctions announced so far:
- Sanctions on Nord Stream 2 which Secretary of State Blinken previously waived in May 2021.
The President has also directed the following measures regarding finance and finance-related institutions and people:
- Full blocking sanctions on two significant Russian financial institutions. The Secretary of the Treasury will impose full blocking sanctions on two large state-owned Russian financial institutions that provide key services crucial to financing the Kremlin and the Russian military: Vnesheconombank and Promsvyazbank and their subsidiaries. Collectively, these institutions hold more than $80 billion in assets and finance the Russian defense sector and economic development. These measures will freeze their assets in the United States, prohibit U.S. individuals and businesses from doing any transactions with them, shut them out of the global financial system, and foreclose access to the U.S. dollar.
- Expanded sovereign debt prohibitions restricting U.S. individuals and firms from participation in secondary markets for new debt issued by the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation. These prohibitions will cut off the Russian government from a key avenue by which it raises capital to fund its priorities and will increase future financing costs. It denies Russia access to key U.S. markets and investors.
- Full blocking sanctions on five Russian elites and their family members: Aleksandr Bortnikov (and his son, Denis), Sergei Kiriyenko (and his son, Vladimir), and Promsvyazbank CEO Petr Fradkov. These individuals and their relatives directly benefit from their connections with the Kremlin. Other Russian elites and their family members are on notice that additional actions could be taken against them.
- In addition, the Secretary of the Treasury will determine that any institution in the financial services sector of the Russian Federation economy is a target for further sanctions. Over 80% of Russia’s daily foreign exchange transactions globally are in U.S. dollars, and roughly half of Russia’s international trade is conducted in dollars: (Fact Sheet: United States Imposes First Tranche of Swift and Severe Costs on Russia).
To be sure, these sanctions may provide long-term incentives for Russia to moderate its course of action in the future, but today, the failure of the United States to act decisively and its indefensible decision to wait almost a full year before imposing any sanctions (effective or ineffective) when America had evidence that Russia had already began to mass troops on the Ukrainian border in March 2021 have dire consequences. Instead of decisiveness, President Biden has maintained that the U.S. is only prepared to impose sanctions after an invasion or after the horses and military equipment have left the barn and are now inside of Ukraine. Acting pursuant to America’s invitation to invade, President Putin has now, perhaps, decided on a full-scale invasion.
Of course, legitimate questions ought to be raised regarding the effect of imposing temporary sanctions on Nord Stream 2 since the pipeline is essentially finished. In addition, questions arise regarding the efficacy of financial sanctions placed on banks and people. Why is this the case?
This is so because sanctions on Nord Stream 2 are meant to be temporary rather than permanent since the pipeline is essentially built. If this assessment is correct, this pipeline will ensure long-term European dependency on Russian energy supplies, thus enabling Germany to sell more luxury vehicles.
Similar skepticism applies to the efficacy of America’s sanctions on Russian financial institutions and financiers. This is so because sophisticated international banks have sophisticated interlocking relationships. This means that although the United States has imposed sanctions on Vnesheconombank and Promsvyazbank and their subsidiaries, which hold more than $80 billion in assets and finance, these banks will respond by moving funds to non-sanctioned banks, engaging in off-books transactions and other forms of evasion. In order for financial sanctions to work, President Biden needs to bar all Russian entities from having any access to our SWIFT bank clearinghouse system, but he has failed to do so.
Similarly, the imposition of trading bans on Americans regarding Russia’s secondary sovereign debt may push up the interest payable on such securities slightly, which means these sanctions are little more than an inconvenience. Likewise, the imposition of sanctions on Russian oligarchs is unlikely to have more than a minor effect on Russian policy for two reasons. First, oligarchs with deep footprints in natural gas and oil, for instance, have enjoyed a huge windfall because worldwide energy prices have exploded due to the Biden Administration’s decision to give up America’s energy independence so that we become more dependent on bad actors like Russia and Iran. Keep in mind that the price of a barrel of oil has risen almost 250 percent since the end of 2020. Lastly, if the Secretary of Treasury extends sanctions to more Russian actors, thus reducing their ability to engage in U.S. dollar denominated transactions, this is likely to be another inconvenience to Russian actors.
Taken as a whole, while President Biden waits or actively intervenes to block effective sanctions on Russia, he continues to put the preferences of the State Department’s band of progressive globalist elites, who seek to formulate a global consensus premised on openness, inclusion, and tolerance ahead of America’s best interests. This policy failure has consequences, which increase the probability of war, so much so that war, which is the ultimate form of intolerance, is on the horizon.
Meanwhile President Putin has engaged in action. More likely than not, that action will lead to bloodshed, leaving the Biden Administration to simply pontificate just like the Obama-Biden Administration pontificated over Russia’s annexation of Crimea in 2014, while President Biden’s band of advisers play on.
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