In wartime, it is wise to treat statements from all sides skeptically. In this case, we don’t need to rely on the assessments of anonymous U.S. officials. When the international markets opened on Monday morning, the value of Russia’s currency plunged by a third. To stem the decline, the Russian Central Bank more than doubled its key interest rate, from 9.5 per cent to twenty per cent, and ordered Russian exporting companies to sell foreign currencies and buy rubles. These desperate moves helped trim losses, but at the close of trading in Moscow the ruble was still down by almost twenty per cent—a huge decline for any currency. In a briefing with reporters, Dmitry Peskov, the Kremlin spokesman, conceded that “economic reality had significantly changed.”
In Washington, meanwhile, the Biden Administration intensified its economic offensive by imposing a freeze on the Central Bank of Russia’s assets held in U.S. financial institutions. The Treasury Department also prohibited any U.S. person, including American banks and businesses, from engaging in transactions with Russia’s Central Bank, finance ministry, or sovereign wealth fund. “This action effectively immobilizes any assets of the Central Bank of the Russian Federation held in the United States or by U.S. persons, wherever located,” the Treasury said, in a statement announcing the new policy. In London, the U.K government has introduced a policy along the same lines.
It wasn’t immediately clear just how much money the Central Bank of Russia still holds in New York, London, and other Western financial centers—and which it will no longer be able to access. (According to some estimates, about two-thirds of Russian reserves are now blocked off in countries that have introduced sanctions.) Even so, experts on economic sanctions described the targeting as unprecedented and highly effective. “The G-7 sanctions against the Russian Central Bank, not the swift sanctions, are the real hammer, and they’re showing effect,” Jonathan Hackenbroich, a policy fellow at the European Council on Foreign Relations, said. “Russia’s Central Bank might struggle to fight massive inflation and panic even after it doubled interest rates and introduced capital controls.”