U.S. Treasury’s Updated Sanctions Strategy Against Russia

Alex Zerden – February 26, 2023

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One-Sentence: Last Tuesday at the Council on Foreign Relations, U.S. Treasury Department Deputy Secretary Wally Adeyemo laid out the Biden Administration’s updated strategy for using sanctions and other economic tools to punish Russia for its expanded invasion of Ukraine.

Three-Pronged Strategy: Deputy Secretary Adeyemo laid out the three-pronged strategy that 1) reinforced close cooperation with partners and allies, particularly the G7 and European Union, 2) reiterated efforts to counter sanctions evasion by Russia including by targeting unspecified intermediaries and 3) renewed pressure on companies and jurisdictions that allow or facilitate evasion.

Background: The United States assembled a global coalition of allies and partners to implement multilateral sanctions and export controls against Russia, including novel price caps on oil and diesel and other refined products. One year later, the administration is refining its approach for the next phase of the conflict and addressing identified gaps.

Context: The speech, along with other efforts like the G-7’s announcement of a “Enforcement Coordination Mechanism” and a February 1, 2023 OFAC action against a network supporting Russia’s military-industrial complex, demonstrate a shift from unprecedented multilateral sanctions designations to a new phase of enforcing existing sanctions. Senior Treasury and Commerce Department officials have traveled recently to places like Turkey and the United Arab Emirates to raise sanctions evasion concerns. These policies remain consistent with the Treasury Department’s October 2021 sanctions review, which emphasized in particular multilateral coordination and engagement strategy as a key element of any sanctions policy framework.

Criticism: Observers argue that the sanctions efforts have not done enough to dampen Russia’s economy, especially as Russia develops alternative supply chains to export its oil outside of the cap and increases imports from China, Turkey, and former Soviet states like Armenia. Russia’s economy is expected to grow in 2023. Consequential economies like India remain on the sidelines. Some developing countries wrongly blame the United States for food shortages caused by Russia.

What’s Next?: This speech indicates that more sanctions and other actions will target sanctions evasion activities. Sanctions policy will continue to evolve based on the military and political realities in Ukraine, as well as the resolve of allies, partners, and adversaries. Treasury has not exhausted its target list for sanctions and announced an additional 105 sanctions against individuals and entities to mark the one-year anniversary, including against an evasion network, along with a determination for sanctions in the metals and mining sectors.

More Analysis from Last Week:

• Edward Fishman, Foreign Affairs, A Tool of Attrition: What the War in Ukraine Has Revealed About Economic Sanctions

• Brian O’Toole and Daniel Fried, Atlantic Council, Sanctions Along Won’t Defeat Russia in Ukraine. But They’re Having a Bigger Impact Than It Might Seem

• TRM Labs, The First Crypto War? Assessing the Illicit Blockchain Ecosystem One Year Into Russia’s Invasion of Ukraine

• Rachel Ziemba, Ziemba Insights, Update on the State of Russian Economy and Sanctions

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Alex Zerden is the Founder of Capitol Peak Strategies; an Adjunct Senior Fellow at the Center for a New American Security (CNAS); and a Senior Advisor at WestExec Advisors.