Russia Growing Richer By The Day. Sanctions Are Another Biden Failure.

In the immediate aftermath of the Russian invasion of Ukraine, the U.S. responded with an unprecedented wave of severe economic and financial sanctions. These sanctions included seizing the assets of Russian oligarchs, excluding Russian banks from the international payment message system called SWIFT, freezing the assets of the Central Bank of Russia, prohibiting new investment in Russia, banning exports of semiconductors and high-tech equipment to Russia, banning Russian commercial aircraft from landing in the United States (except for emergency landings), and blocking exports of Russian oil to the U.S. The EU, UK, Canada, Japan, and other allies introduced similar sanctions.

Russia retaliated by prohibiting exports of strategic metals and other essential inputs to its adversaries and selectively cutting off its exports of natural gas to Poland and Finland. A full-scale financial war is underway side-by-side with the kinetic war on the ground.

How is the financial war going? As described in this article, it’s not going well at all for the U.S. and its allies.

Oligarch assets such as yachts and townhouses have been seized, but that’s exactly what Putin wants. Putin’s support comes from the military, intelligence services, the Orthodox Church, and everyday Russians. Putin regards the oligarchs as potential threats, so he’s happy to see the U.S. destroy them financially.

The Russian ruble is actually stronger than it was before the war began. It was 80-to-1 U.S. dollar in late February and today is about 70-to-1, a 13% gain. Most importantly, Russia’s trade surplus rose to $96 billion in the January-April 2022 period, which is more than triple the surplus for the same period in 2021.

Despite all of the sanctions talk in the media, oil and natural gas are still flowing from Russia to Europe and Russia is still being paid in dollars or euros. These payments are directed to a special account at Russia’s Gazprombank and are not subject to seizure by the U.S. (although Russia is limited in terms of what they can ultimately do with the funds).

Russia has suffered a slight decline in GDP and mild inflation, but the U.S. has suffered far more. Prices for energy, food, and housing in the U.S. are soaring in part because of the supply chain disruptions caused by the financial warfare started by the U.S.

It’s another case of the U.S. not being able to think even two moves ahead when it rushes into feel-good sanctions. The U.S. has said that the sanctions will not be lifted until the last Russian troops leave Ukraine. The Russians are not leaving Ukraine. So, get ready for a lot more financial pain as the war drags on and the costs pile up.

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