Changing Course: Financial Sanctions on Russia

There are reports this morning that the Obama administration is contemplating extending economic sanctions against two large Russian banks– Gazprombank and  Vnesheconombank (VEB).  This is a step I have called for here and here.  If true, this is a significant event and, given the magnitude of Russia’s links to global financial markets, introduces a new era in the use of economic sanctions.  It also makes sense to do this now, as the current strategy is not working to deter Russian aggression against Ukraine.

It is interesting  that the sanctions are aimed at two state-controlled banks most closely associated with the fiscal authorities, and holding back for now on the most active, leveraged banks (e.g., VTB, Sberbank).  So the goal would seem to be to punish the state, not go after corruption or specific activities.  I presume that the sanctions would prohibit U.S. institutions from financing and transacting with the two banks, holding their securities/collateral, or buying and selling their liabilities in U.S. markets.  It is not clear whether the Europeans will match these sanctions, but even if they don’t I believe that the measures could be powerful as long as the major European and Japanese banks do not fill in as U.S. banks depart–and risk of getting entangled in future sanctions.

This piece appears courtesy of

2 Responses to "Changing Course: Financial Sanctions on Russia"

  1. benleet   April 26, 2014 at 1:06 pm

    As intelligent economic goals are pursued by major national markets, disrupting the market access of nations whose practices violate sound ecological and social standards is a prudent step to assure that the global economy is not sucked into a race to the bottom. NAFTA we were assured would have these social and ecological standards, but it didn't. It's not too late. It may be important in future trade agreements to ensure that manufacturing exports incorporate a suitable rising minimum wage, for instance, adaptable for each country, or free trade union standards, or even nationwide democratic standards. Mexico and China are the chief violators of prudent global standards. It would be in the interest of citizens in countries that observe 1st Amendment free speech rights, and other essential rights, to enlarge our criteria, to shut off trade with countries that do not have the minimum standards that we would not ever countenance. Economies are not about profit as much as they are about social welfare. The community of economic analysts are blind to this concept, even antagonistic, in general, there are of course important exceptions. Stiglitz, and Polanyi come to mind, and Wynn Godley.

  2. paulm100   April 29, 2014 at 10:10 pm

    The author obviously chooses to ignore the amoral standards of the United States in its ongoing violent interventions in other countries.

    Are we to assume then that this author is fully in favour of the United States and its more obsequious allied governments being "cast out" of the international markets through stringent sanctions because of their lack of "standards"?
    I am always amazed ( but should not be) at authors such as these who choose to apply their moral standards only to those countries who they perceive as a threat to United States hegemony