U.S. To Directly Warn Companies Against Evading Russia Sanctions

The United States will directly warn companies against evading U.S. sanctions imposed on Russia over the war in Ukraine, Deputy Treasury Secretary Wally Adeyemo said, as Washington seeks to further squeeze Russia's economy.

Speaking to Reuters ahead of the first anniversary of Russia's Feb. 24 invasion of its neighbor, Adeyemo cited specific concerns about the United Arab Emirates, Iran, Turkey and countries near Russia evading sanctions.

"We're going to go directly to their companies and make very clear to their companies that you have a choice," Adeyemo said.

"You can continue to do things that are going to benefit Russia and provide them material support, but then you bear the risk of losing access to the European economy, to the United States economy, to the UK economy - this is your choice," he said. "We're willing to take these actions."

The United States and its allies, including the European Union and United Kingdom, imposed sanctions on Russia following the invasion of Ukraine and have continued to ratchet up pressure since. Among the targets of Washington's sanctions have been Russian President Vladimir Putin, the financial sector and oligarchs.

Adeyemo said the crackdown on sanctions evasion - using sanctions, export controls, and other tools - would focus heavily on manufactured goods, construction and dual-use items, which have both commercial and military applications.

"For most of these companies, for most of these individuals, it's a very easy choice," Adeyemo said.

Washington will also reach out to banks in the United States, Britain, Europe and Japan to ask them to warn their clients that they could lose access to financial institutions if found to be evading U.S. sanctions, Adeyemo said.

The comments come amid signs that Russia's economy was not hit as heavily as initially expected by western sanctions.

The International Monetary Fund last month forecast that Russia's economy would expand by 0.3% in 2023 after shrinking by 2.2% in 2022. In April it had initially forecast a decline of 8.5% in 2022 and a further contraction of 2.3% this year.

SHRINKING ECONOMY

The U.S. Treasury said last week that the United States will focus in coming months on cracking down on facilitators and third-country providers helping Russia evade Western sanctions.

Top Treasury sanctions official, Brian Nelson, traveled to Turkey and the United Arab Emirates the week of Jan. 30 to warn countries and businesses that they could lose access to G7 markets if they do business with entities subject to U.S. curbs.

Adeyemo noted that as Washington began to punish Russia with sanctions, it had not anticipated the strong global corporate response to the war. Companies pulled out of Russia, even in sectors not hit by sanctions, amid calls from stakeholders and over concerns about the risks of doing business in the country.

But he stressed that sanctions and export controls imposed by the United States, the European Union and others have played a key role in the bid to hold Russia accountable. "Russia's economy is very small, relative to our coalition, and getting smaller because of the actions that we've taken."

Edward Fishman, who worked on Russia sanctions at the State Department during President Barack Obama's administration, said that while the threat of sanctions failed to deter Russian President Vladimir Putin, the measures were helping erode Russia's economy and military capacity.

"I do think that there are elements of it that are successful, but I wouldn't say that they're a triumph," said Fishman, now a professor at Columbia University, adding that the biggest success was the unity between the United States and its allies in working to target Russia.