The prohibition takes effect immediately and prevents the Russian government from accessing its dollar reserves around the world.
On Monday, the U.S. Treasury Department prohibited American companies and financial institutions from carrying out any operations with the Central Bank of the Russian Federation (CBRF) and froze all dollar assets of this institution.
Announced before the opening of the U.S. markets, this prohibition takes effect immediately and prevents the Russian Central Bank from accessing its dollar reserves around the world. The ban also covers operations with the Russian National Investment Fund (RDIF).
Besides freezing the CBRF dollar-denominated assets, the measure affects the use of the dollar throughout the world for operations with the Central Bank of Russia.
"Our prohibition affects any dollar in the world, from any institution, which cannot be transacted with the Russian Central Bank," the U.S. authorities insisted.
These new sanctions will have a negative and immediate impact on the ruble, a currency that has been losing value in international markets for a few days.
��#Zakharova: For 8 years, we have tried to encourage the authorities in Kiev to stop the punitive operation against its own people and settle the conflict in #Donbass by peaceful, political and diplomatic means.— MFA Russia ���� (@mfa_russia) February 25, 2022
☝️Unfortunately, they simply ignored us. pic.twitter.com/A7GCwN37dO
Russia has some US$630 billion in foreign currency reserves, which are usually repatriated every time President Vladimir Putin administration wish to sell them to strengthen the ruble. Due to the U.S. sanctions, however, Russia will no longer be able to carry out this foreign exchange policy operation.
Besides promoting a further devaluation of the Russian currency, the U.S. sanctions seek a greater "disconnection" of this country from the global financial system. This will happen at a time when the Russian economy is contracting and experiencing inflation.
"Our objective is to make sure that the Russian economy goes backwards if President Putin decides to continue to go forward with an invasion in Ukraine, and we have the tools to continue to do that," a senior U.S. administration official said, as reported by Reuters.
So far, the U.S. has not defined the list of entities that will be excluded from the SWIFT interbank payment system. This list will later be sent to Belgium, where the Society for World Interbank Financial Telecommunication (SWIFT) must endorse it for it to come into force.