Payam Javan: The US and European nations decided on Saturday to impose the most severe financial penalties yet on Russia for its continuous invasion of Ukraine, targeting the Russian economy’s central bank reserves and shutting some Russian banks off from a critical global financial network. The decision, made as Ukrainian forces fought to keep Russian forces out of Moscow and residents hunkered down in subway tunnels, basements, and underground garages, has the potential to spread the pain of Western retaliation for President Vladimir Putin’s invasion to ordinary Russians far more widely than previous rounds of sanctions.
While US and European officials have stated that they are still working out the details of how to execute the new sanctions and that they want to exempt Russia’s oil and natural gas exports, the sanctions might be among the most severe ever imposed on a country. If fully implemented, the regulations will substantially harm the Russian economy and severely restrict the country’s capacity to import and export goods.
The central bank limitations are aimed at restricting access to the Kremlin’s more than $600 billion in reserves and are intended to limit Russia’s capacity to maintain the currency as it depreciates due to intensifying Western sanctions. As Russians hurried to sell their targeted currency for safer assets, analysts projected increased Russian bank runs and decreasing government reserves. According to US officials, previously announced sanctions have already had an impact on Russia, causing its ruble to fall to its lowest level against the dollar in history and its stock market to experience its worst week on record.