The central bank of Russia

On Monday, the Biden administration announced new sanctions against the central bank of Russia, in response to Russia's invasion of Ukraine, CNBC reported. This action freezes the bank’s assets within the United States and bars Americans from doing any business with it.  

“The unprecedented action we are taking today will significantly limit Russia’s ability to use assets to finance its destabilizing activities, and target the funds [Russian President Vladimir] Putin and his inner circle depend on to enable his invasion of Ukraine,” Treasury Secretary Janet L. Yellen said in a statement, according to the Washington Post. “Today, in coordination with partners and allies, we are following through on key commitments to restrict Russia’s access to these valuable resources.” 

These sanctions come on top of other sanctions imposed on Russia by the United States and its allies over the weekend. On Saturday, the United  States, Canada and several European countries agreed to remove key Russian banks from the interbank messaging system, SWIFT (Society for Worldwide Interbank Financial Telecommunication), a major step, which will separate the country from much of the global financial system. That means that Russian banks won’t be able to communicate securely with banks beyond their border.

On Friday, the United States, along with the United Kingdom and the European Union announced sanctions against Putin and Russian Foreign Minister Sergey Lavrov. The United States has also imposed sanctions against Kirill Dmitriev, an ally of Russian President Vladimir Putin, well as the direct investment fund Dmitriev heads. The Russian Direct Investment Fund, or RDIF, is officially a sovereign wealth fund but is widely considered a slush fund for Putin, according to CNBC. 

Even Switzerland, which has historically maintained its neutrality during conflicts, adopted the European Union sanctions, including freezing Russian assets, NBC reported. This move will deprive many rich Russians of access to one of their favored havens for stashing money. The Swiss president Ignazio Cassis told a news conference Monday that Russia’s invasion was intolerable on moral and political grounds.  

In response to these and other penalties, CNBC reported, the ruble fell to as low as 111 to the dollar on Monday, from 83 on Friday. The central bank, known as the Bank of Russia, kept the country’s stock exchange, the Moscow Exchange, closed on Monday. Also on Monday, that bank more than doubled the country’s benchmark interest rate, from 9.5 percent to 20 percent in response to the drop in the value of the ruble. The increase rates is meant to motivate depositors to keep cash in Russian banks since the West and its allies have moved to isolate Moscow’s largest lenders from international markets. 

CNBC quoted a senior Biden administration official, who spoke on the condition of anonymity in order to share Washington’s thinking: “We wanted to put these actions in place before our markets open because what we learned over the course of the weekend from our allies and partners was the Russian Central Bank was attempting to move assets and there would be a great deal of asset flight starting on Monday morning from institutions around the world,” the official said, on a conference call with reporters. The official added, “Our strategy to put it simply is to make sure that the Russian economy goes backward. As long as President Putin decides to go forward with his invasion of Ukraine.” 

In addition, the leaders of the European Commission, France, Germany, Italy, the United Kingdom, Canada and United States  plan to limit the sale of what are known as “golden passports.” A Biden administration described  golden passports as a loophole that allows wealthy Russians connected to the Kremlin to become citizens in other countries and access certain financial systems.