Biden to launch expanded sanctions going after banks working with Moscow

President Biden is expected to sign an executive order Friday expanding sanctions targeting Russia’s ability to build up its military.

The new authority would threaten foreign banks connected to the U.S. financial system with penalties for transacting with Moscow. 

The executive order (EO) warns foreign banks against processing “significant transactions relating to Russia’s military industrial base,” saying that doing so would risk losing access to the American financial system. 

“The message we’re going to send clearly to people is that you either do the due diligence that you need to, or you put at risk your ability to have access to our system,” a senior administration official said in a call with reporters previewing the measure. 

“Our overall goal here is to put sand in the gears of Russia’s supply chain, which we think is one of the most effective ways to slow Russia down.”

The move comes ahead of the two-year mark of Russia’s full-scale invasion of Ukraine, which launched Feb 24, 2022, and as international sanctions have failed to bankrupt Moscow’s ability to wage war.

The U.S., along with partner nations in the Group of 7, demonstrated unprecedented coordination by imposing strict sanctions against Russia in the early days of the war, and have sought to tighten them over the past two years.

But Russian President Vladimir Putin has shown remarkable resilience in surviving the sanctions and circumventing blocks. Russia’s economy contracted by a little more than 2 percent in 2022, compared to earlier predictions that its economy would shrink by 15 percent under the weight of sanctions. 

The executive order aims to close loopholes that Russia has used to source materials blocked by international sanctions by holding foreign banks responsible for scrutinizing more closely significant transactions with front companies or middlemen that ultimately deliver goods benefiting the Russian military. 

“The new executive order by the president will simply give us a tool that will allow us to go after financial institutions that failed to make the choice to either stop allowing their companies to ship these goods to Russia’s military industrialized complex or getting out of business with Russia,” the official said.

The executive order also aims to block the import to the U.S. of specific Russian exports, in particular diamonds and seafood, that may be modified in third countries to hide their origin.

“In the coming months, the United States and our partners intend to introduce import restrictions on certain diamonds mined, processed, or produced in Russia, building on an existing U.S. ban on the importation of Russian-origin diamonds … even if these products are then transformed in a third country,” according to a fact sheet provided by the White House.  

The ban will also extend to certain products harvested in Russian waters or by Russia-flagged vessels.

“The Department of the Treasury intends to issue a determination identifying specific types of seafood that will be subject to this prohibition,” the White House said.