‘Do the right thing’: How US, allies united to punish Putin

WASHINGTON — Just days before Russia invaded Ukraine on February 24, President Joe Biden quietly dispatched a team to the European Union headquarters in Belgium.

These were not spy chiefs or generals, but experts at reading fine print and tracking the flow of money, computer chips and other goods around the world. Their mandate: to inflict maximum pain on Russian President Vladimir Putin, making it more difficult, if not impossible, for him to fund a protracted war in Ukraine and deny him access to technologies that are at the heart of modern warfare.

There were intense rallies in February in Brussels, Paris, London and Berlin, often six hours at a time, as the Allies tried to work out the details of a historic economic blockade, according to officials in the Biden government. Some of the exports that the US wanted to ban were met begrudgingly by the Europeans, who would essentially tell their own companies to leave behind several billion dollars in annual revenue from Russia.

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If there was a standoff, US negotiators would get Commerce Secretary Gina Raimondo on the phone.

United States Secretary of Commerce Gina Raimondo speaks during a speech at Brown University, March 15, 2022, in Providence, RI (AP Photo/Charles Krupa, File)

“You can say ‘no’ now, but if the body bags come from Ukraine, you don’t want to be a mugger,” Raimondo told allied counterparts. “Do the right thing.”

Everyone has signed up – and before the invasion.

Raimondo said the threats from Putin’s imminent attack on Ukraine eventually led to the agreement and the fast timeline.

“We all quickly got religion that it was time to work together and stick together,” she said. “If you cause enough pain, you isolate Putin, then this war will end.”

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The richest countries in the world – outside of China – are directly confronting Putin on their preferential terms. They have imposed sanctions in which their strengths intersect with Russia’s vulnerabilities. Russia depends on the US, the EU, Japan, South Korea and Taiwan for advanced technologies and investments, so the allies decided to shut down Moscow.

Biden

President Joe Biden speaks in the South Court Auditorium on the White House campus, March 18, 2022, in Washington. (AP Photo/Patrick Semansky, File)

It is a strategy game designed to trap Putin in a tailspin as foreign investors withdraw their money in response to the atrocities. It is also a remarkable display of unity that may be tested in the coming weeks by the Allies’ own reliance on fossil fuels.

A group of economists on Thursday estimated that EU countries have transferred more than 13.3 billion euros ($14.7 billion) to Russia for oil, natural gas and coal since the war started, essentially financing Putin’s war machine.

While Allied talks leading up to the war were critical, the EU did not just wait for US instructions to act. Bloc members had been discussing for months.

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An EU diplomat, who spoke on condition of anonymity to discuss internal talks, outlined possible sanctions in an interview as early as January, including the export ban, noting that the EU is pushing its coalition on enforcing sanctions since the Russian occupation of parts of the Donbas region of Ukraine.

But this time, the US and EU responded to Russia’s aggression with a new set of policies designed to cripple Putin’s ability to fight by denying it access to the semiconductors, computers, telecommunications equipment, lasers and sensors that make up an integral part. of war material.

This is a supply chain squeeze that will force Russia to raid existing planes, tanks and other equipment for spare parts – essentially eroding its military and economic capacity. The same US and EU officials who took on their own supply chain challenges after the pandemic found a way to compound the problem for Russia through trade regulations.

As a sign of early success, US officials point to the closure of Lada auto plants in Russia and the more than 300 companies that have stopped doing business with Russia. The companies include not only Starbucks, but also chipmakers such as Germany’s Infineon, which said it has stopped all direct and indirect deliveries to Russia, as well as technical support.

Zelenskyy

Ukrainian President Volodymyr Zelensky gestures during a joint press conference with the French president after their meeting in Kiev on February 8, 2022. (Sergei Supinsk/AFP via Getty Images/Getty Images)

Within days of the invasion, the Allies blocked the Russian central bank’s foreign assets. Two senior officials of the Biden administration, who were not authorized to discuss strategy planning publicly and spoke on condition of anonymity, said the option had not been initially presented to allies over concerns that Russia might move its money in advance. They waited to present the asset freeze until the invasion began and the images of bombings and deaths forced the Europeans to agree almost immediately.

The freeze rendered useless half of the more than $600 billion in Putin’s war chest. While the Russian stock market has closed and the ruble’s value has fallen, sanctions have been designed in such a way that financial effects sharpen over time. As long as Ukraine can cope with serious casualties with military aid, the sanctions will be more exhausting for Putin.

European Commission Vice-President Valdis Dombrovskis on Thursday praised the “very good coordination” between the countries and said the sanctions “bite hard. Russia’s financial markets are on the brink of collapse”. He also noted that the sanctions come at a cost to the Allies, although the cost is much lower than the effects of the war’s expansion.

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But with each new round of sanctions, the unity of the 27 EU members is increasingly being tested. If there is a ban on Russian oil and gas, Germany and Italy, both of which are heavily dependent on Russian energy, will be in a difficult position to resist the push from several eastern member states, such as Poland and the Baltic states, to target Putin. , to keep it under control. difficult as soon as possible. The US is less dependent on Russian oil and natural gas, making it easier for Biden to ban those imports earlier this month.

Vladimir Putin

Russian President Vladimir Putin speaks while attending the G20 summit via video conference in Moscow on October 30, 2021. (Evgeniy Paulin, Sputnik, Kremlin Pool Photo via AP/AP Newsroom)

There is also the risk that sanctions cannot stop Putin or that Russia can still find ways to bring goods into its economy. Trade data analyzed by ImportGenius shows that China supplanted Germany as the main source of exports to Russia in 2021 — and US officials say Russia has asked the Chinese government for help.

On Twitter, Olivier Blanchard, former chief economist at the International Monetary Fund and now a fellow at the Peterson Institute of International Economics, equated the sanctions with bombing German factories during World War II. Those bombings disrupted the German war machine in a way that made it impossible to prolong a protracted battle — and economists played a part in choosing the targets.

Despite all that has been done, the question remains whether it is enough.

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Blanchard recommends extending export controls from defense-related manufacturing to “anything that disorganizes manufacturing” in the Russian economy. If Russian-made refrigerators require a gasket made in the EU, restricting access to that gasket will make it more difficult for the Russian economy to function, he said.

Tania Babina, a Ukrainian-born finance professor at Columbia University, said sanctions usually don’t stop dictators and warned Putin could eventually become even stronger unless the US and EU act more aggressively. She said Europeans should add sanctions banning the use of Russian oil and natural gas.

“He is going to throw everything to win and will send his grandmother to fight if necessary,” said Babina. “He can’t lose Ukraine. That’s why it’s so important to cut off Russia’s energy export revenues.”

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But Babina noted that there is an even more horrifying price to pay for the Allied strategy of sanctions: Ukrainian lives.

“How many people will we let die before Putin runs out of assets?” she asked.

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