On February 28, 2022 the Russian central bank was raising its key interest rate to 20 percent from 9.5 percent as the West pummelled the country with sanctions over Moscow’s invasion of Ukraine.
The United States on Monday banned all US transactions with Russia’s central bank effective immediately, the Treasury Department said as it unveiled an unprecedented sanction to further punish Moscow for invading Ukraine.
“This action effectively immobilizes any assets of the Central Bank of the Russian Federation held in the United States or by US persons, wherever located,” the Treasury said of the measure taken in coordination with Western allies.
It will severely limit Russia’s ability to defend the ruble and prop up its economy.
This new move, along with others taken by US allies, will make it hard for the Russian central bank to use its vast reserves of hard currency to buy rubles.
According to a senior administration official,Transactions to defend the ruble, which is now plummeting, “will no longer be possible and fortress Russia will be exposed,”.
The official said the package of coordinated sanctions will create a “vicious feedback loop.”
“Inflation is very likely to spike. Purchasing power is likely to plummet. Investment is likely to plummet,” the official said.
“Our objective is to make sure that the Russian economy goes backwards if President Putin decided to continue to go forward with an invasion of Ukraine, and we have the tools to continue to do that,” the official told reporters.
The US also slapped sanctions Monday on the Russian Direct Investment Fund, a state-owned institution that Russia uses to raise funds overseas. It is run by Kirill Dmitriev, who is close to Putin.
“This fund and its leadership are symbols of deep-seated Russian corruption and influence-peddling globally,” said this official.