US sanctions top financial institutions in Russia

Introduction

The war which Russia started against Ukraine is still going on. Right now, there is no victor. The human and economic implications of the conflict have been far reaching especially in Ukraine where the actual fights are taking place. The Biden administration is doing all it could to cripple Russia's ability to finance any aspect of the war such as paying partners that make war weapons for them. Hence, the US have announced fresh sanctions against 2 top financial institutions in Russia.

Fresh sanctions against VEB and PSB

VEB and PSB are two top financial institutions in Russia. They are perceived to be really crucial in Russia war efforts especially in his ability to conduct financial transactions with partners and fundraising. Limiting or even stopping the capabilities of these two institutions successfully would be a huge blow to Russia in their war against Ukraine. Below is the officially announcement of the sanctions from the US treasury:

Today Treasury is targeting Russia’s ability to finance aggression against its neighbors by sanctioning the Corporation Bank for Development and Foreign Economic Affairs Vnesheconombank (VEB) and Promsvyazbank Public Joint Stock Company (PSB), along with 42 of their subsidiaries. source

Throughout the duration of the war with Ukraine, the US stated that these top two financial institutions have carried on business both in Russia and overseas. They have been instrumental in the war efforts as they are the instruments for giving out huge defense contracts to Russian partners. The US also stated that Russia have been able to carry on with the war efforts because they easily raise funds to support the war through the institutions. Hence, the ban.

Implications of the sanction

The two financial institutions VEB and PSB are longer allowed to do business in the US environs and in countries that are ally to US. According to the US treasury, this sanction will automatically mean that VEB and PSB would have all of their assets in the US confiscated. The two Institutions also have many other subsidiaries that were registered in their name. These subsidiaries are also sanctioned.

The sanction carries more broader implications too. US citizens or any other legal residents in the US are to discontinue any form of business or financial transactions with the institutions. The aim here is to disable and isolate the institutions from the US financial systems and eventually cripple their capabilities of being valuable instruments of the war efforts. These two institutions play huge role in Russian economy and military financing. Take a look below at what the US treasury has to say about the influence of these two institutions.

VEB provides financing for large-scale projects to develop the country’s infrastructure and industrial production. PSB has issued billions of dollars in financial support for Russian defense sector companies, and it currently services nearly 70 percent of state contracts signed by the Russian Ministry of Defense (MoD) source

The world wants an end to the war

It has always been difficult to predict the future as can be seen in the Russian war against Ukraine. The war has dragged on for a good part of 2 years and there seem to be no immediate end to it. Whether the sanctions would produce the desired results remain to be seen. What is obvious is that everyone wants to see an end to the war.

The fights between Russia and Ukraine and had huge human costs. The death of fighters from the two countries could be avoided if there was no war. Also, innocent civilians suffer each day as many have left their homes and sought refuge in temporary shelters. Entire cities have been destroyed. The human cost has been huge.

The economic cost too is far-reaching. The destruction of buildings and public infrastructure as a result of the war are economic costs that will take time to rebuild. Factors of production has been displaced and destroyed too. And at the end of the day, it would take much time and resources to replace what has been lost - of course some things are simply irreplaceable.

Finally

Peace is priceless. It would be great if the two parties eventually come to a peaceful end to the conflict as fast as possible. If this is done, then more damage and destruction would be prevented and the rebuilding process can start immediately.

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