Five Ways Sanctions Are Hitting Russia
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WASHINGTON — The Biden administration boasts that the sanctions the United States and its allies have imposed on Russia to punish it for invading Ukraine are historic — such sweeping economic penalties have never before been enacted on a nation of that size.
The State Department said that as of late October, the American government had issued about 1,500 new and 750 amended sanctions listings since President Vladimir V. Putin started the war in February. And 37 countries have joined the sanctions coalition, the department said.
The World Bank estimates that Russia’s economy will contract 4.5 percent this year, while the International Monetary Fund projects a 3.4 percent contraction. The recession is expected to continue next year. Russia is grappling with a steep drop in imports and a fall in real incomes.
But the sanctions have not been as devastating as Western officials had hoped. The backbone of Russia’s economy — oil and gas exports — remains largely intact. Global oil prices surged after the war began, and Russia is on track to earn more this year from oil sales than in 2021, despite boycotts by the United States and several allies. China and India are among nations that have increased their imports.
Russia’s economy could suffer more in the months to come, because of a partial European embargo on Russian oil that will go into effect in December and export controls on critical technology.
But Russian officials are withholding important data, making it harder for others to gauge the true effect of the sanctions and export controls.
In 2021, Russia had a $1.77 trillion economy, the world’s 11th largest. Analysts are piecing together a picture of how it is faring.
Here are five key areas they are watching:
Finance
The Treasury Department is enforcing sanctions on Russia’s largest banks, which means those institutions are cut off from conducting transactions with banks and companies around the world that want to avoid being punished by the U.S. government.
These measures also prevent many Russian companies from doing business since they need to use the international banking system for transactions. The State Department said the penalties target institutions that hold 80 percent of banking assets in Russia.
The United States and partner governments have frozen $300 billion of Russian central bank assets held in banks around the world, limiting the institution’s “ability to aid the war effort and mitigate sanctions impacts,” the State Department said.
American and European officials have discussed whether Russian government assets frozen abroad should be seized to pay for war reparations and the reconstruction of Ukraine.
Trade
The European Union, Britain and the United States have placed restrictions on some trade with Russia, including halting sales of luxury items to the country and working with allies to stop Russian purchases of semiconductors and other advanced technology.
But governments have been more reluctant to clamp down on Russia’s energy trade because of concerns about economic growth and inflation. And some countries continue to purchase Russian uranium, diamonds, nickel and host of other raw materials.
That continued trade, along with the high price of oil and gas this year, has meant that Russian exports have actually increased in value since the invasion of Ukraine, giving Moscow ample revenue to fund its war, according to an analysis by The New York Times.
Russian imports, meanwhile, have dropped sharply, reflecting the decision of multinational companies to sever ties with Russia and flagging demand for consumer products in the country as its economy slows. Major shipping lines like Maersk and MSC have stopped serving Russia, hampering its ability to gain access to foreign products.
Technology
With sanctions and export controls, the United States and its allies are aiming to restrict technology sales to Russia’s military and energy industries, as well as other strategic sectors.
The goal is to cripple Moscow’s ability to wage and finance a war.
The countries in the coalition have banned global exports of semiconductors, computers, lasers, telecommunications equipment and other technical goods to Russia. And they have imposed sanctions on Rostec, Russia’s largest military and defense conglomerate; Mikron, the country’s largest maker and exporter of microchips; and Tactical Missiles Corporation, which produces missiles the Russian military is using in Ukraine.
“They’re using ancient types of tanks; they’re bringing those out of storage,” said Alexander Gabuev, a senior fellow at the Carnegie Endowment for International Peace. “The data indicates that export controls are biting quite hard on the military.”
When the Biden administration issued the export controls, it said it was also targeting strategic sectors like aviation, shipping and energy extraction. But Mr. Gabuev said it was harder to tell whether the controls were having a similar effect on those other industries.
Russia’s production of cars and appliances has collapsed. But bigger issues with the Russian economy and supply chains could also be to blame.
Energy
The United States and its allies have had a hard time squeezing revenues that Russian state-owned enterprises have received from energy sales.
Russia is the world’s third-largest oil producer, and oil sales are a cornerstone of its economy. Russia also sells and transports natural gas to European and Asian nations, using a network of pipelines. As global inflation soars, governments are reluctant to impose energy bans that could end up increasing market prices.
The United States and Britain import relatively little Russian oil, so their boycotts have had a negligible impact on Russia’s total oil revenue, especially given the spring surge in the market price of oil. Turkey, a member of the North Atlantic Treaty Organization, has increased purchases of Russian oil this year. So have China and India, which together account for more than 40 percent of Russia’s oil exports.
In May, the European Commission announced plans to end all imports of Russian fossil fuels by 2027. A European embargo on seaborne shipments of Russian oil and sanctions on shipping insurance are scheduled to take effect in December.
However, governments fear a rise in energy prices, so the United States and its allies are discussing a price cap mechanism that would amount to a buyer’s cartel — nations would offer to buy Russian oil only at a deep discount, which, if Russia agreed to sell, would keep the country’s oil on the market while depriving Moscow of some revenue. But Russia has threatened to not sell any oil to countries abiding by the price cap. If that happens, global oil would be in short supply, leading to spiking energy prices.
U.S. officials say they hope Saudi Arabia will increase production. But last month, Saudi and Russian officials led the OPEC Plus energy group in announcing that it would cut production by two million barrels per day. U.S. officials believed they had struck a secret deal with the Saudis in May for the kingdom to increase oil production.
The Biden administration was furious and accused Saudi Arabia of aiding Russia, which Saudi officials deny doing.
Elites
The Biden administration has imposed sanctions on hundreds of Russian government officials, executives and oligarchs, along with many of their family members.
Those penalized include some of the most senior leaders of the Russian government, including Mr. Putin himself; his foreign minister, Sergey V. Lavrov; and Russia’s top two military commanders, Defense Minister Sergei K. Shoigu and the chief of the general staff, Valery Gerasimov.
All 450 members of Russia’s lower house of Parliament and the 170 members of the upper house have also been hit with sanctions.
U.S. sanctions on individuals generally block their access to any assets in the United States, prevent them from conducting transactions with Americans and deny them visas to enter the United States.
Few if any senior Russian officials are likely to have U.S. assets, however, or plans to visit America soon.
Parallel sanctions imposed by major European countries such as Britain, France and Germany are more likely to cause disruptions, especially for midlevel officials and wealthy Russians who travel and do business outside their country.
The U.S. sanctions could similarly affect the spouses and children of prominent Russians, who are accustomed to traveling and doing business freely, and who can act as conduits for their more prominent relatives.
In an August crackdown on several Russian businessmen, including steel and fertilizer kingpins, Secretary of State Antony J. Blinken said in a statement that “Russia’s elite are running massive revenue-generating companies and funding their own opulent lifestyles outside of Russia.”
The United States has placed sanctions on Herman Gref, the chief executive of Sberbank, Russia’s largest bank, and Alisher Usmanov, one of the world’s richest people. And it has blacklisted 10 yachts, four planes and one helicopter — though not all of those vehicles has been seized by law enforcement.
Among the most notable targets of Biden administration sanctions was a citizen named in May: Alina Kabaeva, a former Olympic gymnast and member of Parliament. Ms. Kabaeva is also widely reputed to be Mr. Putin’s girlfriend.
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