US claims sanctions success, says Russia’s financial flows with Turkey, UAE and Kazakhstan disrupted

US claims sanctions success, says Russia’s financial flows with Turkey, UAE and Kazakhstan disrupted
Senior US officials including US Deputy Treasury Secretary Wally Adeyemo have warned financial firms they could be denied access to G7 markets if they transact with entities subject to US curbs on trade with Russia. / US Dept of Treasury, public domain
By bne IntelliNews February 26, 2024

The US Treasury Department on February 26 claimed a Ukraine war sanctions success. It cited data showing how the Biden administration’s threat to hit foreign financial institutions with secondary sanctions has significantly impacted financial flows between Russia and countries including Turkey, the United Arab Emirates and Kazakhstan.

US Deputy Treasury Secretary Wally Adeyemo, in an interview with Reuters, referred to data available to his department, including information in reports from financial institutions. It evidenced, he said, declines in the movement of funds since Washington in December issued an executive order warning that secondary sanctions would be applied to financial institutions in third countries that help Russia dodge Western sanctions imposed over its invasion of Ukraine.

The ineffectiveness of sanctions aimed at the Kremlin and those who help it do business became a growing theme in the second year of the war, which began almost exactly two years ago. The US and wider West are badly in need of some sanctions successes that show meaningful progress in efforts to derail Russia’s expanding war economy. Some facts on how the Putin regime is managing to build its war machine for the Ukraine battlefront are plain embarrassing for Western capitals—only last week, data analysis revealed UK firms are playing an important role in arming Russia by sending equipment and machinery via third countries in Central Asia and the South Caucasus.

"In the data that I can see, I've seen a significant difference in terms of financial flows that have been transactions... potentially being blocked by institutions," Adeyemo was reported as saying in his interview.

"And I've heard about this also from some of the monitors who are in institutions ... that they're taking a more cautious approach with regard to doing any business with Russia, which is exactly what we wanted," he added.

Reuters reported last week that the US threat to financial firms as described by Adeyemo has chilled Turkish-Russian trade. It pointed to the disruption or slowing of some payments for both imported Russian oil and Turkish exports, quoting seven sources familiar with the matter.

As part of the effort to tighten the application of sanctions, senior US officials have travelled to Turkey, the UAE and other countries to issue warnings that companies could be denied access to G7 markets if they transact with entities subject to US curbs. Importantly, the executive order that came ahead of the warning to the financial firms, did not distinguish between firms knowingly or unwittingly engaged in transactions on behalf of those subject to US sanctions or connected to Russia's military industrial base. All firms, it was made clear, were exposed to sanctions action.

Adeyemo was further reported as saying that bank compliance departments were taking the executive order seriously given it represented the first time Washington had said it would deploy such secondary sanctions.

Secondary sanctions are used to target foreign people or companies doing business with those already designated with US sanctions.

"Soon after, from their CEOs on down, they started requesting meetings with us to say 'what can we do to make sure that we keep access to the dollar,'" Reuters also reported Adeyemo as saying, adding: "And these were large banks ... who knew that they were in focus and wanted to make sure they're on the right side. Because ultimately for them, even though they may do some business with Russia, it pales in comparison to the amount of business they do with the United States or the business they do in the dollar."

He continued: "What we've seen in terms of the information that we're collecting, is it's putting sand in the gears of the financial network that they [the sanctions breakers] were using to get access to goods, and now they're having to find new ways to do that."