Russian supply chains next in line for sanctions — US Treasury's Adeyemo

The US and its allies plan new sanctions on more sectors of Russia's economy that are critical to sustaining its invasion of Ukraine, including supply chains, deputy US treasury secretary Wally Adeyemo said on Tuesday.

Adeyemo, speaking in London on a European trip to consult with allies on strengthening and enforcing sanctions to punish Russia, said the broadening of those efforts was aimed at undermining “the Kremlin's ability to operate its war machine”.

“In addition to sanctioning companies in sectors that enable the Kremlin's malign activities, we also plan to take actions to disrupt their critical supply chains,” Adeyemo told an event at the think-tank Chatham House.

“Our goal is to use an integrated approach that includes export controls which will bite over time and sanctions that will bite immediately,” he said, adding they would also target alternative military suppliers used by Russia.

Russian President Vladimir Putin sent his troops into Ukraine on what he calls a “special military operation” to demilitarise and “denazify” Ukraine.

Since the invasion began on February 24, western allies have frozen Russia's central bank's foreign currency assets, banned key Russian banks and wealthy elites from hard currency transactions and put restrictions on exports of advanced semiconductors and other technology.

The sanctions have stripped the Kremlin of resources and helped to cripple Russia's economy. Adeyemo said they would stay in place for as long as the invasion continued.

He attributed the success of the sanctions to a strong multilateral effort and the strength of an international economic and financial system built by democratic countries at the end of World War 2, which created institutions including the International Monetary Fund, the World Bank and the precursor to the World Trade Organization.

International norms

These institutions created international rules, norms and values that set the stage for decades of prosperity, but which have been rejected by Russia in its invasion, he said.

Adeyemo said he expected countries such as China and India to remain part of the global financial system rather than seeing the crisis in Ukraine as a moment to decouple from the West.

“The system has adapted and moulded to members that have come along to create huge reductions in poverty, and not just western countries,” he said. “That is why, I think, ultimately they are going to remain part of the system because the benefits of the system far outweigh the risks.”

However, he said it was not open to those that failed to respect the core principles of territorial integrity and self-determination, including Russian oligarchs targeted by sanctions and those who may attempt to help them hide their assets.

Adeyemo said the international system that gave rise to the sanctions needed strengthening, including by addressing food insecurity resulting from the conflict, which has disrupted grain shipments from Ukraine.

The use of economic sanctions must be refined to preserve their efficacy, including avoiding unilateral actions and ensuring that they are tied to clear policy objectives and can be easily reversed when these are met, he added.

He said the international community needed to finalise the global minimum corporate tax agreement and continue providing the resources needed to end the Covid-19 pandemic, with broader vaccine access.