US President Joe Biden on Wednesday vowed to “rachet up the pain” for Russian president Vladimir Putin with a new package of penalties meant to “dramatically escalate” the “financial shock” that has been levied against Moscow since Mr Putin ordered an unprovoked invasion of in February.
According to a senior administration official who briefed reporters on the latest actions against Mr Putin and his government, Mr Biden will sign an executive order which will add Mr Putin’s two adult daughters — Maria and Katerina — as well as Foreign Minister Sergei Lavrov’s wife and children and members of Russia’s security council to the list of officials who’ve faced personal sanctions as a result of the invasion.
He will also levy “full blocking sanctions” on Sberbank — Russia’s largest financial institution — and the largest private bank in Russia, Alfa Bank, and impose a ban on any new US investment in Russia.
Speaking to labour union leaders at the North America’s Building Trades Unions annual legislative conference, Mr Biden said “responsible nations” must work together to hold Mr Putin and his allies accountable for what he described as “major war crimes” committed by Russian forces in Ukraine.
“Together with our allies and our partners, we’re going to keep raising the economic cost and ratchet up the pain for Putin and further increase Russia’s economic isolation,” said Mr Biden, who added that the actions the US has taken so far are predicted to shrink Russia’s gross domestic product by double digits this year.
“Our sanctions are likely to wipe out the last 15 years of Russia’s economic gains,” he said. “And because we’ve cut Russia off from importing technologies like semiconductors and encryption security and critical components of quantum technology that they need to compete in the 21st century, we’re going to stifle Russia’s ability for its’ economy to grow for years to come”.
A senior administration official who briefed reporters on the latest US actions called Sberbank “the main artery in the Russian financial system” because it holds nearly one-third of Russia's total banking sector assets. He added that the US has “fully blocked” more than two-thirds of the Russian banking sector.
“We're locking down any accounts, any funds that those banks hold in the United States — they'll not be able to touch any of their money, they'll not be able to do any business here,” Mr Biden continued, adding that the investment ban he will sign will “make sure that new money can't come into Russia to replace what's left”.
The official also described US plans to “methodically [eject] Russia from the international economic order” so as to “deny the privileges and benefits it once enjoyed,” such as Normalised Trade Relations and borrowing privileges from the World Bank and International Monetary Fund.
He noted that earlier this week, the Treasury Department announced a ban on Russia using its frozen central bank assets for debt payments.
The official said the effect of the ban is that Moscow “will now have to find new sources of dollars from outside the US, and to find a new payment route, other than US banks, to avoid falling into default.
“That's Russia’s choice as to how it proceeds — even if Russia taps into other sources of hard currency to remain current on its debt obligations that will translate into fewer resources available to Putin to fund his war machine”.
Since the US and EU first began levying sanctions against Moscow following the invasion of Ukraine, more than 600 multinational corporations have chosen to exit the Russian market in the face of the Western sanctions regime.
Mr Biden told labour leaders the mass exodus of corporations from Russia showed “corporate America” was “stepping up” because executives are “choos[ing] to leave Russia rather than the risk being associated with Putin brutal war”.
The official said the investment ban should accelerate the collapse of private sector economic activity in Russia.
“This will make sure that the the mass exodus from Russia that we're seeing from the private sector ... will endure, and without investment from our private sector, Putin will lose private sector know how and skills that travel with investment,” said the official, who added that “the knock on effects” from the “ongoing brain drain” will be “profound”.
In total, the official said the combined effects of the US and EU sanctions regime has significantly reduced Russians’ quality of life and predicted that the decline would continue.
“The reality is the country is descending into economic and financial and technological isolation. And at this rate, it will go back to Soviet style living standards from the 1980s,” he said.
“Putin himself has said the sanctions will require deep structural changes to the Russian economy to deal with the new realities, including inflation and unemployment — they simply weren't prepared for their economic fortress to crumble. and that's what's happened”.