The US has imposed its most severe level of sanctions on Sberbank, Russia’s largest financial institution, and Alfa-Bank, the country’s biggest private bank, escalating its economic punishment of Moscow in response to atrocities committed by Russian forces in Ukraine.
The announcement on Wednesday of “full blocking sanctions”, which prevent the lenders from transacting with any US institutions or individuals, came after top US officials including Joe Biden, US president, warned this week that they were planning to impose harsher restrictions on Russia.
A senior US official said the latest measures came in response to “the sickening brutality in Bucha”, a city near the capital Kyiv where gruesome images of the bodies of Ukrainian civilians have emerged in recent days, indicating a possible massacre by Russian soldiers.
“Treasury is committed to holding Russia accountable for its actions so it cannot benefit from the international financial system,” Janet Yellen, the US Treasury secretary, told Congress during a hearing on Wednesday.
The US also imposed sanctions on Vladimir Putin’s two adult daughters, Ekaterina Tikhonova and Maria Vorontsova; the wife and daughter of Sergei Lavrov, foreign minister; and members of Russia’s Security Council, including Dmitry Medvedev, former president, and Mikhail Mishustin, prime minister.
In addition, the US said it would prohibit any new American investments in Russia, and unveil new blocking sanctions on large Russian state-owned enterprises on Thursday.
Immediately after the invasion, the US had prohibited any debt or equity transactions with Alfa and Sberbank, but its new “full blocking sanctions” involve much stricter curbs.
“This is the most severe action we can take in terms of financial measures,” the US official said. “And in practice, the history of sanctions is when we impose full-blocking sanctions on [a] financial institution, the rest of the world, even in other jurisdictions that have not yet imposed a full block, they respect the regime. So there tends to be a multiplier effect.”
The official added that the US and EU had chosen to target Putin’s daughters because they believed they were helping shield the Russian president’s wealth.
“We believe that many of Putin’s assets are hidden with family members and that’s why we’re targeting them,” he said.
The UK government on Wednesday also announced additional sanctions against Putin’s regime, including full asset freezes against Sberbank.
The measures, which Liz Truss, UK foreign secretary, said marked “the toughest sanctions yet”, included a ban on imports of Russian iron and steel products alongside an outright ban on new investment in Russia.
The UK also imposed sanctions on a further eight individuals linked to key Russian industries, including Andrey Akimov, chief executive of Gazprombank, and Leonid Mikhelson, founder and chief executive of Novatek.
The US and European allies had hoped that the initial burst of hefty sanctions they imposed in the wake of Russia’s invasion in late February, including cutting off Moscow’s access to its foreign reserves by banning transactions with its central bank, would be sufficient to isolate Russia financially without causing excessive spillovers into the rest of the global economy.
But as the conflict has worn on, they have been forced to consider additional targets, widening the net to include companies and individuals in third countries continuing to do business with Russian entities and sharpening their enforcement of existing sanctions.
Edward Fishman, a former Russia and Europe sanctions lead at the state department, called Wednesday’s measures “the most significant sanctions taken since the [Russian] central bank sanctions” imposed in late February.
“We’re headed towards Iran-style sanctions,” he added, referring to the decades-long measures against Tehran beginning in 1979. “This is a conveyor belt and it only leads in one direction.”
Despite the new sanctions, some US legislators on Wednesday criticised the Biden administration for not doing enough, noting that the package stopped short of levying the harshest penalties on certain oligarchs and still included exemptions for Russian energy.
David Scott, a Democrat on the House financial services committee, told Yellen that the Treasury department’s decision to issue a special licence for Alisher Usmanov — an oligarch he described as Putin’s “favourite” — which allowed him to continue doing business was becoming a “black mark” on the nation.
“Our reputation as the world leader is at stake when these types of things happen, and there’s no explanation for it,” Scott said.
When asked by Patrick McHenry, the top Republican representative on the House financial services committee, why Russia was still able to earn “hundreds of millions of dollars each day in hard currency” through its oil and gas exports, Yellen acknowledged that alternatives were limited.
“Unfortunately, many of our European partners remain heavily dependent on Russian natural gas as well as oil, and they are committed to making the transition away from that dependence as rapid as possible,” she said.
However, Yellen said the US was prepared to wield sanctions even more broadly, including against China if it attacked Taiwan.
“We are concerned about Taiwan and will act as appropriate,” she said. “In the case of Russia, we’ve threatened significant consequences, we’ve imposed significant consequences, and I think that you should not doubt our ability and resolve to do the same in other situations”.