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U.S. Treasury Escalates ‘Sanction Warfare’ Against Russia, Oblivious to Its Own Continued Failures

On June 12, the U.S. Treasury Department announced a war plan against the Russian banking and physical economic systems. Meant to create destruction in Russia, it will most likely have the opposite effect: to prompte de-dollarization and the acceleration of a new development world order.

Some features of that were covered by this press service on June 16. On June 12, the U.S. Treasury Department released its 29-page report, “As Russia Completes Transition to a Full War Economy, Treasury Takes Sweeping Aim at Foundational Financial Infrastructure and Access to Third Country Support,” a package of 300 sanctions against institutions and individuals.

As the title of the report indicated, it classified the Russian economy as a whole as a war economy. Hence, almost any financial institution, production facility, or maker of components that carried out any transaction with Russia, even if predominantly civilian, could be construed as helping the Russian “war economy,” and thus be vulnerable to U.S. primary or secondary sanctions.

There are three character-types of sanctions in this package. First, financial-related institutions. In a further attempt to close down the Russian financial system, the Treasury’s Office of Foreign Assets Control (OFAC), which is responsible for sanctions application, targets not just Russian banks, but specific cities in foreign countries where those banks are suspected of evading sanctions. For example, the OFAC updated its listings for sanctions for “Promsvyazbank Public Joint Stock (PJS) Company to include its locations in Beijing, People’s Republic of China, Bishkek, Kyrgyz Republic, and New Delhi, India;” and “for Sbrebank to include its location in Beijing, P.R.C., and New Delhi and Mumbai, India,” and so forth.

The Treasury’s OFAC also targeted the Moscow Exchange (MOEX), which is not only Russia’s largest public trading market for stocks and foreign exchange (currency trading), but also the country’s largest clearing service between financial transactions, and depository service.

The second character-type of institutions cited for sanctions are companies involved in physical production of microchips/integrated circuits supplied by other countries, but in particular China. It also targets producers of machine tools, chemicals and lab equipment, lasers and fiber optics, electronic equipment, and so forth. If the product could be used for the Russian real economy, but somehow construed to be “dual-use,” and thus, could be somehow of use to the military economy, the company producing it could be sanctioned.

The third character-type of institution appears to fall under the classification that since the Russian economy as a whole is becoming a “war economy,” and thus if the goods are supplied to any part of the Russian Federation in general, they abet the war economy and the companies that produce them could be subject to sanction.

This is perhaps the 12th iteration of U.S. sanctions against Russia (and several iterations against China). They have caused difficulties, but have failed, especially against the Russia-China integrated economic relationship, against which they are now primarily targeted.

However, these sanctions will succeed in accelerating the move out of the dollar, and toward a new economic-financial system that serves the needs and aspirations of the Global Majority. This round of sanctions relies on secondary sanctions: If a secondary company carries out transactions with a primary company that is sanctioned, then the secondary company can be sanctioned, even if it has no dealings with Russia. A supplier company to Russia will not want to be sanctioned, nor will a secondary company trading with a primary company. Because of the extent and severity of the U.S. sanctions, and the fact that the U.S. will not relent, it becomes more necessary to move out of trading with the dollar and the euro (which has a parallel set of sanctions).

Within a few hours of the U.S.’s announced sanctions, the well-prepared Central Bank of Russia announced June 12 that the “yuan/ruble exchange rate will become a reference point for market participants.” The two currencies trade at a rate of 12.2 rubles for 1 yuan. If one could get agreement to similar parity rate between two other BRICS members’ currencies—say, the Brazilian real and the Iranian rial—one has four currencies and their cross-rates, and the foundation for a fixed exchange system, and unit of trade account, to which system other BRICS countries and countries of the Global Majority could join, in an orderly staged fashion. No doubt, teams at the BRICS are already working on this.

The intended severity and real stupidity of the U.S. Treasury Department’s new sanctions will cause a new fixed-rate development-based system to blossom.