In an important development reported by European Pravda, Wally Adeyemo, the Deputy Treasury Secretary of the United States, in an interview with Reuters, revealed that the threat of sanctions against financial institutions has significantly influenced the flow of funds between Russia and countries like Turkey, the United Arab Emirates, and Kazakhstan. This revelation underscores the broader implications of the United States' sanctions policy in response to Russia's actions, particularly its invasion of Ukraine.
Adeyemo detailed how financial reports available to the Treasury Department demonstrate a downturn in the movement of funds following the issuance of a December executive order by Washington. This order threatened sanctions against third-country financial institutions aiding Russia in circumventing the Western sanctions imposed due to its invasion of Ukraine. The impact of this warning from the United States appears to have resonated across the financial landscape, leading to a more cautious approach towards any business involving Russia.
According to Adeyemo, this cautious approach is exactly what the United States had aimed for. Banks' compliance departments have taken the executive order seriously, marking the first instance where Washington declared its intent to apply secondary sanctions. This led to significant banks seeking meetings with the Treasury to discuss how they could ensure continued access to the US dollar. These institutions, recognizing their prominence and the scrutiny they are under, wanted to ensure they were "on the right side" of US policy.
The Deputy Treasury Secretary pointed out the stark reality facing these financial institutions: even if they could conduct some business with Russia, it pales in comparison to the volume of business they conduct with the United States or in US dollars. This statement highlights the global financial system's heavy reliance on the US dollar and the significant leverage the United States holds in enforcing its foreign policy objectives through economic means.
So far, Washington has refrained from using the new executive order to impose sanctions on foreign financial institutions directly. However, the mere threat of such action has had tangible effects. For instance, Reuters reported last week, citing sources, that the US threat to sanction financial firms dealing with Russia has cooled Turkish-Russian trade, disrupting or delaying payments for both imported oil and Turkish exports.
In a related development, Finnish heavy-duty vehicle parts manufacturer HD-Parts, which recently found itself on the United States' sanctions list, announced a complete cessation of its trade with Russia. This move is part of a broader pattern of companies and countries adjusting their economic activities to avoid falling foul of US sanctions.
It's important to note that on February 23, the United States imposed sanctions on 26 companies and individuals from 11 countries, including China and Serbia. These entities were targeted for assisting Russia in circumventing sanctions to import critically important technologies and equipment for its military-industrial complex.
This situation illustrates the intricate web of global finance and trade and the significant impact of US sanctions policy on international economic relations. The United States' use of economic measures as a tool of foreign policy, especially in response to the Russian invasion of Ukraine, serves as a powerful reminder of the interconnectedness of global economies and the far-reaching consequences of geopolitical conflicts.
