An economic sanction is the introduction of penalties aimed at a country or other entity, that are used to bring about pressure for social or political change. Sanctions can include travel bans, asset freezes, arms embargoes, and trade restrictions; most recently demonstrated through the sanctions imposed on Russia.
Asset freezing means that all funds and economic resources that are owned, held or controlled by the person/business targeted by the freeze, and that are under UK jurisdiction, must be frozen, and that no funds or economic resources can be made available (directly or indirectly) to or for the benefit of these persons.
The UK, USA and European Union have all frozen the assets of the Central Bank of Russia, to stop it using its £470 billion worth of foreign currency reserves. The asset freeze was enforced in order to significantly limit Russia’s ability to finance its ongoing destabilisation effort in Ukraine, and to target the funds that Putin and his inner circle depend on to enable this invasion.
On March 24, Switzerland also froze more than $6 billion worth of sanctioned Russian assets, Reuters reported.
Furthermore, although the asset freeze is very recent, Russia is already suffering economic consequences. The ruble was reported to trade at a record low of 105.27 per dollar, making one ruble worth less than 1 U.S. cent. However, the ruble recovered ground after Russia’s central bank increased its key interest rate from 9.5% to 20% to raise the currency and prevent a run-on banks.
All major Russian banks – such as VTB, Sovcombank and Otkritiye – have had their assets frozen and will be excluded from the UK financial system. This will stop them from accessing sterling and clearing payments through the UK.
Some Russian banks are also being removed from the international financial messaging system SWIFT; a step towards blocking Russia’s ties to the international financial system. SWIFT is used to transfer money between more than 11,000 banks and other financial institutes around the world.
This partial ban will delay payments for Russia’s energy exports and further isolate Moscow from the global financial system. However, many other Russian banks are still able to use SWIFT, and therefore these banks can help the banks that have been banned. Even Russian financial institutions that are on the sanctioned list can use alternative messaging systems.
The ban on UK borrowing means that there will be a ban on the sale of sovereign debt, issued as bonds by the government in foreign currencies, to finance the growth and development of Russia. Therefore, the Russian state, banks, and privately owned companies will no longer be able to borrow billions of pounds from UK lenders.
The UK government has also announced it will no longer issue any new guarantees, loans and insurance for exports to Russia and Belarus in order to limit Russian access to British markets.
The United States, United Kingdom, and European Union have sanctioned many Russian oligarchs who are alleged to have ties to Vladimir Putin. Consequently, their assets in the U.K. have been frozen, they are banned from entering the country and are now prohibited from doing business with British individuals and entities.
These oligarchs include:
The government has also passed the Economic Crime Bill, which is intended to stop wealthy Russians using London for money laundering and hiding gains linked to organised crime.
The main way to keep up to date with newly issued sanctions against Russia, is to watch the news daily so you are aware of any new developments. Additionally, keep an eye on the government website for updates.
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