Treasury Aims for Economic Pain on Russia, but Critics Question Effectiveness

At a speech in London last week, Mr. Adeyemo touted the ability of sanctions to change behavior, describing the measures as a part of the equation that adversaries such as Russia need to consider when they violate international norms.

“The idea that you can violate the sovereignty of another country and enjoy the privileges of integration into the global economy is one our allies and partners will not tolerate,” Mr. Adeyemo said at the Chatham House, a think tank.

Yet even the United States, which is not reliant on Russian energy, has wrestled with how far to go with its penalties.

Within the Treasury Department, officials have been in an ongoing debate about how far to push the sanctions without creating unintended consequences that would rattle the financial system and inflame inflation, which is soaring across much of the world.

The impact on the U.S. economy has been a top priority, and Janet L. Yellen, the Treasury secretary, has expressed concern about measures that would amplify inflation. The sanctions on Russia have already led to higher prices for gasoline, and officials are wary that they could bring spikes in food and car prices as Russian wheat and mineral exports are disrupted.

“Our goal from the outset has been to impose maximum pain on Russia, while to the best of our ability shielding the United States and our partners from undue economic harm,” Ms. Yellen told lawmakers on Wednesday.

As officials considered how to target the ruble, Ms. Yellen, a former Federal Reserve chair, argued against just imposing a ban on foreign exchange transactions, which would prevent Russia from buying dollars. She suggested instead that immobilizing Russia’s foreign reserves — savings that are held in U.S. dollars, euros and other liquid assets — while creating exemptions for Russia to accept payment for certain energy transactions would be the most effective way to inflict pain on Russia’s economy while minimizing the impact on the U.S. and its allies.

Article source: https://www.nytimes.com/2022/04/08/us/politics/russia-sanctions-effectiveness-adeyemo.html