By JOSH BOAK, Associated Press
WASHINGTON (AP) — Just days before Russia invaded Ukraine on Feb. 24, President Joe Biden quietly dispatched a team to European Union headquarters in Belgium.
They weren’t spy chiefs or generals, but experts in 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 finance a protracted war in Ukraine and denying him access to the technologies at the heart of modern warfare.
Biden administration officials say intense meetings took place in February in Brussels, Paris, London and Berlin, often taking place for six hours at a stretch as allies tried to work out the details of a historic economic blockade. . Some of the exports the United States wanted to ban were met with reluctance by Europeans, who would have essentially told their own companies to give up billions of dollars in annual revenue from Russia.
In the event of an impasse, the American negotiators put the Secretary of Commerce, Gina Raimondo, on the telephone.
“You can say ‘no’ now, but when the body bags come out of Ukraine, you won’t want to be a resister,” Raimondo told his Allied counterparts. “Do the right thing.”
Everyone signed – and before the invasion.
Raimondo said what ultimately drove the deal and the quick timeline was the threat of Putin’s imminent attack on Ukraine.
“We all realized quickly that it was time to regroup and stick together,” she said. “If you cause enough pain, isolate Putin, it will end this war.”
The world’s wealthiest nations — outside of China — are directly confronting Putin on their preferred terms. They have imposed sanctions in which their strengths intersect with Russia’s vulnerabilities. Russia depends on the US, EU, Japan, South Korea and Taiwan for advanced technology and investment. The allies therefore decided to cut off Moscow.
It’s a strategic game designed to trap Putin in a downward spiral as foreign investors withdraw their money in response to atrocities. It’s also a remarkable show of unity that could be tested in the coming weeks by the allies’ own reliance on fossil fuels.
A group of economists estimated on Thursday that EU countries had transferred more than 13.3 billion euros ($14.7 billion) to Russia for oil, natural gas and coal since the start. of war, essentially funding Putin’s war machine.
While Allied talks in the run-up to war were critical, the EU was not simply waiting for the US to be directed to act. The Bloc members had been consulting for months.
An EU diplomat, speaking on condition of anonymity to discuss the internal talks, described in an interview as early as January the potential sanctions which included the export ban, noting that the EU had maintained its coalition on enforcement of sanctions since Russia’s 2014 occupation of parts of Ukraine’s Donbass region.
But this time the US and EU have responded to Russia’s aggression with a new set of policies aimed at crippling Putin’s ability to fight by denying him access to semiconductors, computers, telecommunications equipment, lasers and sensors integrated into war material.
This is a supply chain squeeze that will force Russia to attack existing planes, tanks and other equipment for spare parts, essentially eroding its military and economic capability. The same US and European officials facing their own post-pandemic supply chain issues have found a way to magnify 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 are not just Starbucks, but chipmakers such as Germany’s Infineon which said it has stopped all direct and indirect shipments to Russia as well as technical support.
A few days after the invasion, the allies blocked the foreign assets of the Russian central bank. Two senior Biden administration officials, who were not authorized to discuss strategy planning publicly and spoke on condition of anonymity. said this option was not initially presented to the allies for fear that Russia could move its money in advance. They waited to introduce the asset freeze until the invasion began and the images of bombing and death forced the Europeans to agree almost immediately.
The freeze rendered half of Putin’s more than $600 billion war chest unusable. While the Russian stock market has been shut down and the value of the ruble has plunged, the sanctions are designed so that the financial effects will tighten over time. As long as Ukraine is able to resist with military aid against serious casualties, sanctions will do more to wear Putin down.
European Commission Vice President Valdis Dombrovskis on Thursday hailed the “very good coordination” between the nations and said the sanctions “are tough. Russian financial markets are on the verge of collapse.” He also noted that sanctions create costs for allies, although the price is far below the consequences of the spread of war.
Yet with each new round of sanctions, the unity of the 27 EU members is increasingly tested. If the ban on Russian oil and gas is imposed, Germany and Italy, both highly dependent on Russian energy, will be in a difficult position to contain the will of several Eastern member countries such as the Poland and the Baltic States who want to hit Putin as hard as possible as soon as possible. The United States is less dependent on Russian oil and natural gas, making it easier for Biden to ban such imports earlier this month.
There is also the risk that sanctions will not stop Putin or that Russia may still find ways to introduce goods into its economy. Trade data analyzed by ImportGenius shows that China has overtaken Germany in 2021 as the main source of exports to Russia – and US officials say Russia has sought help from the Chinese government.
On Twitter, Olivier Blanchard, a former chief economist of the International Monetary Fund and now a fellow at the Peterson Institute of International Economics, likened the sanctions to the bombing of German factories during World War II. These bombings disrupted the German war machine in a way that made it impossible to continue a prolonged fight – and economists played a role in the choice of targets.
For all that has been done, the question remains whether it is enough.
Blanchard recommends extending export controls on defence-related production to “anything that disrupts production” in the Russian economy. If Russian-made refrigerators need an EU-made gasket, restricting access to that gasket makes it harder for the Russian economy to function, he said.
Ukraine-born Columbia University finance professor Tania Babina said sanctions don’t usually stop dictators and she warned that Putin could ultimately become even more entrenched unless the United States and the EU take more aggressive action. She said the Europeans should add sanctions banning the use of Russian oil and natural gas.
“He will throw everything to win, will send his grandmother to fight if necessary,” Babina said. “He can’t lose Ukraine. That’s why it’s so important to cut Russia’s energy export revenue.
But Babina noted that there is another far more frightening cost to the Allied sanctions strategy: Ukrainian lives.
“How many people do we let die before Putin runs out of assets?” she asked.
Associated Press writer Raf Casert in Brussels contributed to this report.
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