Economic Sanctions on Russian War Banks: A Unprecedented Disruption in Russia’s Economy and Trade
In December, the US Treasury Department announced economic sanctions on foreign banks supporting Russian warfare. This move has had a significant impact on Russia’s economy, with exports from countries like Turkey plummeting. The sanctions target banks financing equipment crucial to Russia’s warfare and have disrupted the flow of money in Russia significantly.
The so-called secondary sanctions aim at banks in countries with increased trade with Russia since the aggression against Ukraine. This has led to a collapse in trade between Russia and these countries in the first quarter of the year as banks severed financial relations. For example, Turkey’s exports to Russia dropped by a third from the previous year to $2.1 billion. Exports of high-priority products from Turkey, critical for warfare but intended for civilian use, fell by 40% to $93 billion from the previous quarter.
Russian companies are now resorting to smaller banks and alternative currencies due to fear of US sanctions. Experts believe that this drop in war-related exports is a result of banks’ fears of potential sanctions. The US can track dollar transactions and penalize banks working with companies tied to warfare. As a result, Russian companies are increasingly using rubles for trade, with the share of exports paid in rubles rising from 15% to 40%.
The use of rubles in imports has also increased, causing a significant shift in Russia’s trade practices. This change is attributed to the sanctions imposed by the US on foreign banks aiding Russian warfare.
In conclusion, the US Treasury Department’s announcement of economic sanctions on foreign banks supporting Russian warfare has had far-reaching consequences for Russia’s economy. The decline in exports from countries like Turkey is just one example of how these sanctions have disrupted trade flows and forced Russian companies to adopt new practices to avoid potential penalties.
