By Daphne Psaledakis and Andrea Shalal and Steve Holland
WASHINGTON (Reuters) – The United States on Monday banned U.S. citizens from carrying out any transactions involving Russia’s central bank, the Russian National Wealth Fund and the Russian Ministry of Finance, in another step in sanctions imposed on Moscow over the invasion of Ukraine.
The two economic sanctions imposed by the United States and its allies on Russia’s central bank and other key sources of wealth are likely to increase Russian inflation, cripple its purchasing power and reduce investment, U.S. officials said on Monday as the new measures were announced.
As early as last week, when the invasion took place, the United States and its allies imposed several rounds of sanctions against Moscow, including against Russian President Vladimir Putin and Russia’s biggest creditors.
“This is a vicious cycle that is triggered by Putin’s own choices and accelerated by his own aggression,” said a senior US government official.
Talks between Russian and Ukrainian officials began at the Belarusian border on Monday, as Russia faced deepening economic isolation four days after invading Ukraine in the biggest attack on a European state since World War II.
The US Treasury Department in a statement on Monday said it had also imposed sanctions on a major Russian sovereign wealth fund, the Russian Direct Investment Fund.
The United States and its allies announced they would take action against Russia’s central bank on Saturday, in a move that experts saw as a significant escalation of Western sanctions against Moscow.
Another senior US official said the move “immobilized” any assets the Russian Central Bank held in the United States, in a move that will hamper Russia’s ability to access hundreds of billions of dollars in assets.
“Putin’s $630 billion war chest of reserves only matters if he can use it to defend his currency, specifically selling those reserves in exchange for buying the ruble,” the first official said. “After today’s action, this will no longer be possible.”
The Treasury issued a general license along with Monday’s action authorizing certain energy-related transactions through June 24.
The administration of President Joe Biden has been concerned that its sanctions could increase already high gas and energy prices and has taken steps to mitigate this.
Officials on Monday also warned that the United States would not hesitate to launch more sanctions against Russia and that it was also closely watching Belarus’ involvement, adding that Russia’s strong ally could face further consequences if it continued to help Moscow in the invasion.
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