US Sanctions Russia Central Bank, Working on SWIFT Measures

New sanctions on the Russian Central Bank, Ministry of Finance and two Russian investment funds announced Feb. 28 are the “most significant action” the Treasury Department has ever taken against an economy the size of Russia, said a senior administration official that day. “We're doing exactly what we said we’d do,” the official said during a call with reporters. “We said all options are on the table, including the most severe sanctions ever contemplated against Russia.”

The Office of Foreign Assets Control issued new Directive 4 that prohibits transfers of assets to or on behalf of the Central Bank of Russia, the Russian National Wealth Fund and the Russian Ministry of Finance. OFAC also designated the Russian Direct Investment Fund -- which the agency said is "widely considered a slush fund for President Vladimir Putin" -- along with its CEO, Kirill Dmitriev.

The Biden administration said the new banking and fund sanctions will force Russia to “deplete its limited domestic rainy day funds far more quickly” and make government financing, including for its invasion of Ukraine, far more difficult. “Our strategy, to put it simply, is to make sure that the Russian economy goes backwards as long as President Putin decides to go forward with his invasion of Ukraine,” another administration official told reporters.

OFAC also designated RDIF's management company, the Joint Stock Company Management Company of the Russian Direct Investment Fund, and one of the managing company’s subsidiaries -- Limited Liability Company RVC Management Company. The sanctions will help terminate “yet another route through which Russia has benefitted from access to the U.S. financial system,” OFAC said.

The agency also issued new General License No. 8A, which authorizes certain energy-related transactions with the State Corporation Bank for Development and Foreign Economic Affairs Vnesheconombank, the Public Joint Stock Company Bank Financial Corporation Otkritie, the Sovcombank Open Joint Stock Company, the Public Joint Stock Company Sberbank of Russia, the VTB Bank Public Joint Stock Company and any entity they own by 50% or more. The license also authorizes certain transactions with the Central Bank of Russia.

The license defines energy-related transactions as those that involve the extraction, production, refinement, purchase and other activities associated with petroleum, oil and other energy products, including wood and coal. The transactions are authorized through 12:01 a.m. June 24.

The sanctions were coordinated alongside a range of allies, including Germany. France, the U.K., Italy, Japan, Canada and the EU, an administration official said. The U.S. is also still working with the EU and other allies to decide which Russian tanks to remove from the SWIFT system, the administration official said, but they expect to target all currently sanctioned Russian banks.

The official also stressed that it will continue to impose similar consequences on other governments who aid Russia. Although the U.S. announced new sanctions against Belarus last week, more could be coming, the official said. “Those costs will continue to ratchet much higher,” the person said.

Although some observers suspected that China would seek to help Russia evade U.S. export controls and sanctions (see 2202030068), the White House said that appears unlikely. “The latest signs suggest that China is not coming to the rescue,” an official told reporters Feb. 26. A Chinese Foreign Ministry spokesperson said Feb. 28 the country “doesn’t approve of resorting to sanctions to resolve problems” but said it “supports all efforts that are conducive to easing the situation and seeking political settlement.”

The U.S. plans to impose more designations and strengthen its existing sanctions as long as Russia continues its invasion, State Department spokesperson Ned Price said Feb. 28. He specifically pointed to the transatlantic task force the U.S. plans to launch this week with allies to coordinate future Russia sanctions. "We will do more, assuming the Russian federation continues to escalate," Price said. "Together, with our allies and partners, we are going to identify, we are going to hunt down and freeze the assets of Russian companies and oligarchs."