The Russian Federation’s financial flows fell sharply after the US targeted Putin’s military machine

The US crackdown on banks that finance the trade in goods used in Russia’s invasion of Ukraine has made it much more difficult to move money in and out of Russia.

This view is expressed by senior officials and Russian financiers, writes The Financial Times on May 5.

According to the publication, Moscow’s trade volumes with key partners such as Turkey and China fell in the first quarter of this year. Decree of the President of the United States Joe Biden , which was passed late last year, has prompted lenders to abandon Russian counterparties and avoid transactions in a number of currencies. It has become more difficult for Russia to access financial services, the US Treasury Department’s Deputy Assistant Secretary for International Affairs said. Anna Morris .

A wide network of intermediaries is needed to circumvent the restrictions, even if the transactions have nothing to do with the Russian military machine, the newspaper’s sources said. This increases the cost of currency conversion and commission costs.

The payment restrictions have had consequences far beyond the shadow trading of components for the Russian military machine, as banks, to avoid violating US sanctions, have halted entire categories of transactions with Moscow, the publication said.

Russian importers and exporters are also increasingly transacting in rubles due to difficulties in exchanging the currency for dollars and euros, according to financiers. A senior banker explained that foreigners will be allowed to buy rubles on the Moscow exchange for use in settlements with Russian counterparties. These payments can be processed easily because foreign banks can open ruble correspondent accounts in Russian branches, he said.

A senior Russian financier noted that the logical endpoint of what is happening could be “the transformation of Russia into Iran.”

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