Biden’s Flunkies Try to Hit Russia With Sanctions That Only Hurt Our Friends

U.S. and EU sanctions on Russia because of Ukraine have been worse than a complete failure. They have failed to change Russia’s behavior, have failed to hurt Russia’s economy in a material way, and have boomeranged to hurt the U.S., Europe and many western financial institutions.

I wrote about this last year in March and April not long after the war began. My comments were greeted with skepticism (at best) and extreme criticism (at worse). No matter. I was right then and the evidence since has been overwhelming.

The Russian ruble is stronger today than before the war began. Russian oil and gas revenue is higher than it was before the war. Russian oil is being sold at a discount to India and China, but Russia is making up the discount in increased volume.

The Russian economy was only down about 3% in 2022 (earlier estimates expected it to fall around 20% or more), and the Russian economy is expected to show modest growth this year versus likely recessions in the U.S. and Europe. Russia and China are far along in developing an interoperative payments and settlement system for international transactions that will replace the SWIFT system that Russia was ejected from.

Meanwhile, Russia continues to destroy the Ukrainian army with missiles from North Korea, drones from Iran, and its own massive industrial capacity. Worse than that, the evidence is now clear that while U.S. sanctions are not hurting Russia, they are hurting Western financial institutions.

This article reports that the Raiffeisen Bank in Austria is under investigation by the U.S. for allegedly violating U.S. sanctions related to payments, settlement, and clearing with Russian institutions. Raiffeisen Bank may not be a household name in the U.S., but it is one of the largest banks in Austria and the largest foreign bank with operations in Russia.

The investigation is just an inquiry at the moment; no formal charges have been made. Still, it is a good example of how the U.S. comes down hard on institutions that are supposedly friendly to the U.S. while proving ineffective at actually stopping the Russians.

For U.S. regulators, beating up a bank that’s based in the EU is low-hanging fruit. It’s easy to do and there are no jurisdictional obstacles. Actually damaging Russian institutions is extremely difficult because Russia has spent years preparing for just such a financial attack from the United States.

Its banks are robust with good liquidity and access to inter-bank facilities, even without the benefit of SWIFT or western correspondents.

Common sense says, in a war, you should attack your enemies and work with your friends. U.S. officials are so incompetent they have succeeded in doing the opposite. Let’s see how long our “friends” actually stay on our side.

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