The West must hit the Russian economy even harder, says Liz Truss | Foreign Police
The West has frozen more than $350bn (£266bn) of Russia’s $604bn in foreign currency reserves, Liz Truss said on Tuesday.
The British Foreign Secretary revealed on the second day of her visit to Warsaw that 60% of Moscow’s reserves were now unavailable to her, a figure slightly higher than recent calculations. This follows moves by the US Treasury on Monday to make it harder for Russia to repay its dollar-denominated debt.
But Truss, speaking alongside Polish Foreign Minister Zbigniew Rau, said the West must urgently go further and faster to harm Russia’s economy, saying: “The only way to put end to this war is that Vladimir Putin loses in Ukraine”.
She warned: “Although Russian troops were defeated in their initial assault on kyiv, there was no change in their intent and ambition. We see Putin’s forces setting their sights on eastern and southern Ukraine, with the same reckless disregard for civilian lives and national identity.
Poland is probably the UK’s closest European ally in the war with Ukraine, and during his two-day visit Truss met Polish Prime Minister Mateusz Morawiecki. On Monday, he slammed French President Emmanuel Macron for talking to Putin, saying no one had spoken to Hitler. Truss has increasingly set the bar high for the lifting of Western sanctions against Russia, a move welcomed in Poland.
In the wake of alleged Russian war crimes, the UK has joined Poland and Ukraine in pressuring the G7 – comprising Germany, France and Italy – to set specific timetables to end their dependence on oil, gas and coal.
The EU is expected to be willing to take action on coal and oil, but not on gas, since the infrastructure is not in place to end dependence on imports of Russian gas.
A third of Russian coal exports were destined for OECD Europe. Germany, the Netherlands, Turkey and Poland together received 24% of all coal exports from Russia in 2021. Since February, the EU has spent 710m euros (£592m ) for Russian coal, 9.6 billion euros for Russian gas and 8.8 billion euros for Russian oil, according to the pressure group Europe Beyond Coal.
Truss claimed that coordinated sanctions were “pushing the Russian economy back into the Soviet era” and having a crippling impact on those who fuel and finance Putin’s war machine.
But speaking before a meeting of EU, G7 and NATO foreign ministers in Brussels this week, she said the West needed to go further by taking four more steps. These banned Russian ships from ports, cracked down on Russian banks, “[going] after industries that fill Putin’s war machine, like gold,” and agreeing on a clear timetable to phase out imports of Russian gas and oil.
The US and UK have already banned all dealings with Russia’s central bank gold reserves, valued at around $130 billion.
Truss’ assertion that 60% of the Russian central bank’s reserves were out of reach shows the success and limitations of the West’s sanctions regime. On some level, the West can claim progress. For example, Russia’s central bank announced last week that its foreign exchange and gold reserves had fallen since February and the start of the war from $38.8 billion to $604.4 billion as of March 25. .
On this basis, it would take Russia less than a year to exhaust the remaining currency reserves it can access. But in practice, Russia uses funds generated from European purchases of Russian gas channeled through Gazprombank to generate foreign currency with which to defend the rouble.
Early in the crisis, in a surprisingly bold move, Japan, the UK, France, Germany and the US all froze Russian assets, preventing Russia from selling the reserves for rubles. But Russia had sought to protect itself by pursuing a policy of building up its foreign exchange and gold reserves, which had seen it increase its reserves from $368 billion seven years ago to more than $630 billion. dollars.
Figures for 2021 show that around 13% of its assets were stored in China, part of a conscious decision by Russia to withdraw its reserves from the west.
Until this week, the United States allowed Russia to use its frozen funds to make coupon payments on dollar-denominated debt on a case-by-case basis. But on Monday, for the first time, he blocked Russia from paying a $552.4 million principal payment on a maturing bond, saying it could not access its frozen funds.
The Bank of Russia reacted to Western sanctions by doubling interest rates to 20% and requiring hostile countries to pay for their gas supplies in rubles.