Russia Sanctions Target Banks, Spare Energy Exports

The US, UK, and EU announced new sanctions against Russia after its invasion of Ukraine, targeting its biggest banks but sparing its oil and gas exports.

President Joe Biden said on Thursday the US was broadening an earlier "first tranche" of sanctions and was now blacklisting a total of seven Russian banks.

The five additions to the list include Russia's two largest banks, VTB and Sberbank, which the US Treasury says account for nearly 80% of banking assets in Russia.

The move will have knock-on effects for oil and gas companies operating in Russia, but Biden said the sanctions were structured to allow energy payments to continue.

Notably, the new sanctions do not take direct aim at Russia's oil and gas exports, which are a central pillar of its economy, but also a crucial source of energy for countries in Europe and Asia.

Biden said, the new sanctions are "specifically designed to allow energy payments to continue," adding that the US is closely watching prices and will release additional barrels of oil from its strategic stockpile "if conditions warrant."

Washington had not been expected to target Russian oil and gas because of its concerns about high global energy prices.

But analysts have warned that leaving oil and gas exports off the list blunts the impact of sanctions on Russia's economy.

"The economic impact on Russia will also be limited until the sanctions extend to the energy sector, which would be much more painful for Europe, and to a lesser extent the US," said Nicholas Kumbleben, senior analyst at Greenmantle.

Russia Retains Access to Swift

There had been a lot of discussion in Washington this week about whether the US and UK would agree to limit Russia's access to the financial messaging service Swift, which would have further complicated energy payments.

Biden told reporters Thursday that the new banking sanctions were intended to be "of equal consequence" to blocking Moscow from Swift.

He added that "it's always an option" but that the EU was not pursuing it for now.

Biden said the sanctions announced Thursday will limit Russia's ability to conduct transactions in Western currencies and were "purposely designed" to "maximize long-term impact on Russia" and minimize impacts on the US.

The US has also expanded restrictions on access to US debt and equity markets for more than a dozen state-owned enterprises, including Russian gas giant Gazprom, its oil affiliate Gazprom Neft, and Russian oil pipeline operator Transneft.

The sanctions mean the companies in question are now "heavily restricted" from raising capital via US markets, according to the Treasury Department.

The US is also enacting export control curbs to curtail Russia's use of US technology, with the UK and EU also taking similar steps. Among other things, this could affect Russia's refining sector, which relies on some Western technology.

Eroding Russia's Industrial Base

UK sanctions also target a "first tranche" of measures against Russian banks announced earlier in the week, including what Prime Minister Boris Johnson described as a "full asset freeze" for VTB.

Johnson said the combined US and UK financial measures would hurt Moscow because "around half of Russia's trade currently is in US dollars and sterling."

"These powers will also enable us to ban Russian state and private companies from raising funds in the UK, banning dealing with their securities and making loans to them," he said.

The US and EU also slapped new sanctions on Russia's neighbor and ally Belarus "for its role in the assault on Ukraine."

Details of the EU sanctions have not yet been released, but they are said to be closely aligned with the measures announced by Washington and London.

European Commission President Ursula von der Leyen said Brussels had presented a package of "massive and targeted sanctions" to European leaders for their approval.

"These sanctions will suppress Russia's economic growth; increase the borrowing costs; raise inflation; intensify capital outflows; and gradually erode its industrial base," von der Leyen said.

Other nations participating in the coordinated sanctions campaign against Russia include Canada, Norway, Japan and Australia.