Biden called the move “another devastating blow to the Russian economy,” which has been hit by sweeping financial sanctions following Moscow’s invasion of the neighboring country. The US and Europe have cut off major Russian banks from global financial channels, blocked the country’s access to cutting-edge technology, and blacklisted wealthy businessmen who support and profit from Putin’s rule.
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“The free world is uniting to resist Putin,” the president said in a speech from the White House.
Amid Ukrainian President Volodymyr Zelensky’s calls for military support, coordinated allied initiatives have become a new sign that Biden remains determined to use financial weapons to thwart what he called Putin’s “relentless assault” on Ukraine.
The battered Russian economy will shrink by at least 15 percent this year, according to the Institute of International Finance, an association of global banks. On Friday, the White House said 30 years of Russia’s integration into the world economy had been erased in just a few weeks.
“It is undeniable that allied sanctions have had a major impact on the Russian economy and it is important to remember that they will remain in place for some time to come, even if the war in Ukraine ends today,” said Daniel Tannebaum, global head of Russia sanctions. . Oliver Wyman. “And there are more levers to pull.”
The president needs congressional approval to change Russia’s trade status, end the so-called “permanent and normal trade relationship” and treat the country as a pariah along with countries like Cuba and North Korea. European changes also need to be approved by national legislatures.
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House Speaker Nancy Pelosi said the House will consider legislation next week to formalize the policy change.
The president said that the allies would also seek to deprive Russia of the ability to borrow from the International Monetary Fund and the World Bank.
“Putin is the aggressor and he must pay the price,” the president said.
Friday’s action will intensify the allies’ “maximum pressure campaign,” though it pales in comparison to measures already in place, including a ban on Russian oil purchases from the United States, according to Elina Rybakova, deputy chief economist at the Institute of International Finance.
In a largely symbolic move, the administration also plans to ban imports of Russian seafood and alcohol, which totaled $550 million last year. And Biden intends to ban the export from the United States of luxury goods used by Russian oligarchs who support Putin.
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The US has already suspended purchases Russian oil and energy products, which accounted for about 60 percent of $26 billion worth of goods imported from Russia in 2021. Biden’s announcement will have a limited impact on future US orders from Russian companies, according to Ed Gresser, head of the US Department of Commerce. Department of Economic Research representative until last year.
This is because the policy change, if approved by Congress, would restore the import charges imposed in the Smoot-Hawley Tariff Act of 1930. The measure, which many economists believe exacerbated the Great Depression, imposed high tariffs on foreign-made manufactured goods. But this left the raw material virtually unscathed, which benefited the American manufacturers.
“Russia is rather unusual as a large complex economy that is a producer of natural resources,” Gresser said.
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Tariffs will remain at zero levels for some of Russia’s most important commodities, such as palladium, Gresser said. The industrial metal is used to make catalytic converters for automobiles. Other imports, such as plywood, that enter the US duty-free are subject to a 30 percent import duty.
European politicians can hurt Putin even more.
Bilateral trade between the EU and Russia is about 281 US dollars. billion a year, which is about 10 times the trade turnover between the United States and Russia. (Canada announced last week that it would strip Russia and Belarus of its most-favored nation status by imposing a new 35 percent tariff on goods from the two countries.)
The key question is what the EU is doing with Russian energy tariffs. Earlier this week, the European Commission, the union’s executive arm, announced a plan to cut European imports of Russian natural gas by two-thirds this year.
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Russia provides about 40 percent of EU gas supplies, with Germany, Poland, Finland and Hungary particularly dependent on Russian sources. According to the IIF, Austria and the Czech Republic get all their gas from Russia.
“Russia cannot grossly violate international law and at the same time expect to benefit from the privileges of being part of the international economic order,” EU President Ursula von der Leyen said Friday in Versailles, France, announcing the fourth round of European sanctions aimed at present on Saturday.
The allied sanctions imposed to date have already hurt the Russian economy. The ruble has lost almost half its value, the country’s stock market has been closed for more than a week, and foreign corporations are fleeing.
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The war is also damaging the US economy. Gasoline prices hit a record $4.23 a gallon this week, making matters worse. inflation, which has already reached a 40-year high. And on Friday, the University of Michigan consumer confidence index fell to 59.7 from 62.8 as Americans grew increasingly gloomy about the outlook.
With the Russian economy collapsing, Putin started talking about taking retaliatory measures. On Thursday, he approved a legislative proposal to nationalize the assets of foreign corporations that have withdrawn from the Russian market since the war began. Jeffrey Sonnenfeld, a professor at Yale University, estimates that at least 350 multinational corporations have ceased or froze their operations in Russia.
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Even those who support the financial salvos against Russia fear they could accelerate the disruption of global trade rules that normally forbid punitive tariffs. President Trump threatened in 2019 to impose a series of escalating tariff hikes on goods from Mexico to force the Mexican government to crack down on immigration, but has subsequently abandoned the idea.
Chad Bone, an economist at the Peterson Institute for International Economics, said Friday’s action could set a bad precedent for resolving routine commercial disputes.
“Today, everything is definitely in order with Russia,” Bone said. “Just, isn’t it too easy to resort to something like this in the future because of this?”