US Warns of Direct Sanctions and Cuts Putin's Funding... Standoff Intensifies

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina, Reporters Lee Hyun-woo, Park Byung-hee] "This is just the beginning." As the Biden administration, which defined Russia's invasion of Ukraine as having begun, intensified sanctions against Russia targeting financial institutions on the 22nd (local time), both sides appear to be escalating with a strong stance.

◇ US Defines as "Invasion," Imposes Sanctions on Russia

According to the U.S. Treasury Department's Office of Foreign Assets Control (OFAC), the financial institutions included in the sanctions by the Biden administration on this day are Russia's largest state-owned bank, Vnesheconombank (VEB), the defense industry support special bank Promsvyazbank (PSB), and their 42 subsidiaries.

With these sanctions, all assets of these banks within the United States are immediately frozen, and transactions with U.S. companies or individuals are prohibited. The state development bank VEB, with assets worth $53 billion (approximately 63.2 trillion KRW), plays a role in supporting Kremlin funds regardless of its financial situation. It was established by Vladimir Lenin, and Vladimir Putin himself served as its chairman during his tenure as Prime Minister (2008?2012). PSB is responsible for about 70% of Russia's defense industry.

Alongside this, the U.S. has also completely halted Russia's issuance and trading of government bonds in Western financial markets. This clearly signals an intention to tighten the financial lifeline of President Putin. The sanctions also targeted Putin's close associates and their families. Included in the sanctions list are Alexander Bortnikov, Director of the Russian Federal Security Service (FSB), his son Denis Bortnikov, Chairman of the VTB Board, Petr Fradkov, CEO of PSB, Sergey Kiriyenko, First Deputy Chief of Staff of the Russian Presidential Administration, and his son Vladimir Kiriyenko, CEO of VK Group, totaling five individuals.

U.S. Treasury Secretary Janet Yellen explained, "This is a measure to dismantle the Kremlin's (Russia's) financial network and prevent funding for dangerous actions against Ukraine and the world."

In particular, the Biden administration seemed aware of criticism that the sanctions imposed on this day would be insufficient to stop President Putin's strong escalation, considering Russia's level of foreign exchange reserves, and clearly stated that the severity of sanctions would increase depending on Russia's future actions.

A senior U.S. official said, "If the invasion continues, no Russian financial institution will be safe," hinting at measures against Russia's largest bank, Sberbank, and the largest state-owned bank, VEB. The assets held by these banks are estimated at $750 billion, accounting for more than half of Russia's assets. Additionally, expulsion from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) payment network and bans on exports of advanced technology components and products to Russia are also cards currently being prepared by the U.S. The official said, "All options remain on the table," leaving open the possibility of direct sanctions against President Putin.

◇ Will Putin Continue the Invasion? Diverging Analyses

Experts are divided over President Putin's next move. Some argue that he will act swiftly before Ukraine is armed with Western support, while others predict that he will not easily engage in full-scale war due to the astronomical costs of war and post-war expenses.

Rob Lee, Senior Fellow at the Foreign Policy Research Institute (FPRI), a U.S. foreign policy think tank, told CNBC, "If he does not invade now, it could lead to even greater war costs in the future, so he is unlikely to hesitate."

[Image source=Yonhap News]

On the other hand, there is also analysis that a full-scale war itself is unlikely to occur. Foreign Policy, a diplomatic media outlet, reported, "President Putin seems to be aware that the cost burden of classic warfare involving artillery fire and airstrikes has increased," adding, "Full-scale interstate wars have become rare due to the enormous costs of war."

According to the War Costs Analysis Program at Brown University's Watson Institute for International and Public Affairs, the direct and indirect costs of wars the U.S. fought in the first 20 years of the 20th century, including the Iraq and Afghanistan wars, amount to $8 trillion. This is also why Russia is conducting so-called hybrid warfare by augmenting troops and launching cyberattacks.

The room for diplomatic solutions is gradually narrowing. White House Press Secretary Jen Psaki stated on this day, "At this point, there are obviously no plans for a U.S.-Russia summit." The U.S.-Russia foreign ministers' meeting scheduled for the 24th was also canceled.

U.S. Secretary of State Antony Blinken confirmed, "With the invasion underway and Russia clearly refusing diplomacy, pursuing talks makes no sense." He added, "We will not tolerate Russia disguising itself as diplomatic, but if Russia changes its approach, the U.S. will still engage in diplomacy."

This content was produced with the assistance of AI translation services.