President Joe Biden announced on Friday he will revoke Russia’s ‘most favored nation’ trade status over its invasion of Ukraine, another step in the series of harsh economic sanctions he and U.S. allies have imposed on Moscow.
And he vowed Russian President Vladimir Putin would pay a ‘severe price’ if he uses chemical weapons in the Ukraine and said U.S. troops would not join the fight as not to provoke World War III.
Biden announced Russia’s change in status of a trade partner in lockstep with the fellow G7 nations to make it an even heavier burden on Moscow to carry. The move will also deny Russia the ability to borrow money from multilateral institutions like the International Monetary Fund and the World Bank – further cutting off the Kremlin from the rest of the world.
‘The United States and our allies and partners continue to work in lockstep to ramp up the economic pressures on Putin and to further isolate Russia and the global stage,’ Biden said in his announcement from the White House.
The trade ban will target luxury goods as allies try to make lives for difficult for the ruling class of billionaires, many of whom were made rich by Putin’s policies. The U.S. will ban Russian diamonds, vodka and caviar from entering its ports and, in return, will ban American luxury goods – including high end-watches, luxury vehicles, high-end apparel, high-end alcohol, and jewelry – from Russia.
President Biden noted that revoking the favored trade status ‘is going to make it harder for Russia to do business with the United States, and doing it in unison with other nations that make up half of the global economy will be another crushing blow to the Russian economy that’s already suffering very badly from our sanctions,’ he said.
The Russian economy has taken a severe blow as sanctions have been placed and hundreds of businesses – including Apple, Amazon, Disney, McDonalds, Microsoft, Netflix, and TikTok – have left the country.
In his remarks, Biden also reitierated that American troops will not fight in the Ukraine.
‘We will not fight a war against Russia in Ukraine,’ adding that a ‘direct confrontation between NATO and Russia is World War III– something we must strive to prevent.’
The White House has said repeatedly it doesn’t want to escalate the conflict, saying that was why it opposed Poland sending fighter jets to Ukraine and denying to implement a no-fly zone over Ukraine.
President Joe Biden announced he will revoke Russia’s ‘most favored nation’ trade status over its invasion of Ukraine
The U.S. and its allies have invoked severe sanctions on Russia, President Vladimir Putin and Russian companies to cause severe economic hardship
How Biden’s sanctions on alcohol, seafood and diamonds will hit Putin and his cronies and deny $1billion in Russian export revenue
The US imported 48,867 metric tons of seafood from Russia in 2021, worth about $1.2 billion, according to the National Oceanic and Atmospheric Administration.
Crab accounted for the largest portion, with the US buying and importing more than $900 million worth of frozen snow and red king crab last year.
The US does not sell any seafood directly to Russia after a ban was put on all American exports of seafood and fish in 2014.
The U.S. mostly imports its caviar (around 80 percent) from China. Beluga caviar was finally made legal in the U.S. last year after an 15-year import ban.
Imports of Russian vodka to the United States accounted for only 1.3 per cent of total vodka imports in in 2021, according to the Distilled Spirits Council of the United States. The total amounts to $18.5 million dollars in 2021, the Distilled Spirits Council of the United States said.
U.S. imports of Russian vodka have declined by 79% since 2011, and it only accounts for 1.3% of vodka imports, according to the Distilled Spirits Council of the United States
Approximately 30 per cent of the of diamonds produced worldwide come from Russian mines.
90 per cent of which are owned by the state-backed diamond mining giant Alrosa. The US receives little in terms of diamond imports directly from Russia, but the sanctions are likely to hit oligarchs.
The U.S. has now banned the purchase of Russian-mined diamonds, so it will dent the $79billion global diamond industry.
Biden also said the use of chemical weapons would not be tolerated. But he did not detail what those would be.
American officials have expressed concern that Russia could use chemical weapons after the Russian Defense Ministry said Ukraine could make such a move, in what U.S. officials say could be a false flag operation to justify any moves by Moscow.
‘I’m not going to speak about the intelligence but Russia would pay a severe price if they use chemical weapons,’ he said.
Russia has wielded chemical weapons in the past. Moscow used the deadly Novichok poison in 2018 an attempt to assassinate a defector living in Salisbury, England. And it is suspected of using a similar poison against opposition leader Alexei Navalny in 2020.
Russia also offered diplomatic cover to Syrian use of chemical agents. It accused the West of being behind the 2017 attack on Khan Shaykhun with Sarin or similar nerve agent.
The White House declined to offer more details.
‘I don’t have anything to preview on that front,’ deputy press secretary Andrew Bates told reporters when asked what the ‘severe’ consequences would be.
‘We have reason to believe they are trying to fabricate another false justification for more violence. The truth is, Russia is the only country in this equation with a chemical and biological weapons program and violation of international law,’ he said.
The revoked trade status on Russia would allow the U.S. and its allies to impose higher tariffs on some Russian imports, increasing the isolation of the Russian economy in retaliation for the invasion.
Those items will include ban Russian diamonds, alcohol and seafood – impacting the lucrative cavair and vodka trade.
‘This will deny Russia more than $1 billion in export revenues and ensure U.S. citizens are not underwriting Putin’s war,’ the White House noted.
The formal removal will require action by Congress but lawmakers in both parties have signaled they support such a move.
Speaker Nancy Pelosi said Congress would take up the formal legislation next week.
‘When the House returns next week, we will take up legislation to formalize this revocation, and it is our hope that it will receive a strong, bipartisan vote,’ she said in a statement on Friday.
In 2019, Russia was the 26th largest goods trading partner of the United States, with some $28 billion exchanged between the two countries, according to the U.S. Trade Representative’s office.
About 60% of that is Russian oil and gas, which Biden banned earlier this week. But the luxury items market will take a hit. Russia is the world’s largest manufacturer of rough diamonds.
Biden also said he would make it harder on oligarchs to get American luxury items.
‘We’re banning export of luxury luxury goods to Russia. They’re also the latest steps we’re taking but they’re not the last steps we’re gonna take,’ he said.
He noted more Russian individuals will be targeted but he did not name any individual oligarchs.
The ban of U.S. goods to Russia includes high end-watches, luxury vehicles, high-end apparel, high-end alcohol, jewelry, and other goods.
The U.S. export value of the products covered by today’s luxury goods restrictions is nearly $550 million per year.
‘The elites who sustain Putin’s war machine should no longer be able to reap the gains of this system and squander the resources of the Russian people,’ the White House said in a statement.
Other top imports from Russia included mineral fuels, precious metal and stone, iron and steel, fertilizers and inorganic chemicals – all of which will face higher tariffs once Congress acts to revoke Russia’s favored nation trade status.
The move is part of Biden’s strategy to exert financial pressure on Russia to get it to withdraw from the Ukraine.
The most favored nation trade status applies to members of the World Trade Organization (WTO) and allows countries with the status to trade freely and fairly with each other.
Each of the G7 nations is expected to implement its own measures on trading with Russia after its status gets revoked, according to a source familiar with the matter.
Canada was the first major U.S. ally to remove most favored nation status for Russia last week.
Joint Statement by the G7 Announcing Further Economic Costs on Russia
We the Leaders of the Group of Seven (G7) remain resolved to stand with the Ukrainian people and government who heroically resist Russian President Vladimir Putin’s military aggression and war of choice against their sovereign nation. This unprovoked and unjustified attack is causing enormous suffering and a tragic loss of life, including through the increasingly indiscriminate bombing and shelling of civilians in schools, homes, and hospitals.
We are united in our determination to hold President Putin and his regime accountable for this unjustified and unprovoked war that has already isolated Russia in the world. The world should join together in calling on President Putin and his regime to immediately stop its ongoing assault against Ukraine and withdraw its military forces. We stand in solidarity with those who are bravely opposing the invasion of Ukraine.
We urge Russia to ensure safe and unhindered humanitarian access to victims of its assault in Ukraine, and to allow safe passage for civilians wishing to leave. We call for, and commit to provide, humanitarian, medical and financial support to refugees from Ukraine.
Since President Putin launched the Russian Federation’s invasion on February 24, our countries have imposed expansive restrictive measures that have severely compromised Russia’s economy and financial system, as evidenced by the massive market reactions. We have collectively isolated key Russian banks from the global financial system; blunted the Central Bank of Russia´s ability to utilise its foreign reserves; imposed sweeping export bans and controls that cut Russia off from our advanced technologies; and targeted the architects of this war, that is Russian President Vladimir Putin and his accomplices, as well as the Lukashenko regime in Belarus.
In addition to announced plans, we will make further efforts to reduce our reliance on Russian energy, while ensuring that we do so in an orderly fashion and in ways that provide time for the world to secure alternative and sustainable supplies. In addition, private sector companies are leaving Russia with unprecedented speed and solidarity. We stand with our companies that are seeking an orderly withdrawal from the Russian market.
We remain resolved to isolate Russia further from our economies and the international financial system. Consequently, we commit to taking further measures as soon as possible in the context of our ongoing response and consistent with our respective legal authorities and processes:
First, we will endeavor, consistent with our national processes, to take action that will deny Russia Most-Favoured-Nation status relating to key products. This will revoke important benefits of Russia’s membership of the World Trade Organization and ensure that the products of Russian companies no longer receive Most-Favoured-Nation treatment in our economies. We welcome the ongoing preparation of a statement by a broad coalition of WTO members, including the G7, announcing their revocation of Russia’s Most-Favoured-Nation status.
Second, we are working collectively to prevent Russia from obtaining financing from the leading multilateral financial institutions, including the International Monetary Fund, the World Bank and the European Bank for Reconstruction and Development. Russia cannot grossly violate international law and expect to benefit from being part of the international economic order. We welcome the IMF and World Bank Group’s rapid and ongoing efforts to get financial assistance to Ukraine. We also welcome the steps the OECD has taken to restrict Russia’s participation in relevant bodies.
Third, we commit to continuing our campaign of pressure against Russian elites, proxies and oligarchs close to President Putin and other architects of the war as well as their families and their enablers. We commend the work done by many of our governments to identify and freeze mobile and immobile assets belonging to sanctioned individuals and entities, and resolve to continue this campaign of pressure as a matter of priority. To that end, we have operationalised the task force announced on February 26, which will target the assets of Russian elites close to President Putin and the architects of his war. Our sanctions packages are carefully targeted so as not to impede the delivery of humanitarian assistance.
Fourth, we commit to maintaining the effectiveness of our restrictive measures, to cracking down on evasion and to closing loop-holes. Specifically, in addition to other measures planned to prevent evasion, we will ensure that the Russian state and elites, proxies and oligarchs cannot leverage digital assets as a means of evading or offsetting the impact of international sanctions, which will further limit their access to the global financial system. It is commonly understood that our current sanctions already cover crypto-assets. We commit to taking measures to better detect and interdict any illicit activity, and we will impose costs on illicit Russian actors using digital assets to enhance and transfer their wealth, consistent with our national processes.
Fifth, we are resolved to fighting off the Russian regime’s attempts to spread disinformation. We affirm and support the right of the Russian people to free and unbiased information.
Sixth, we stand ready to impose further restrictions on exports and imports of key goods and technologies on the Russian Federation, which aim at denying Russia revenues and at ensuring that our citizens are not underwriting President Putin’s war, consistent with national processes. We note that international companies are already withdrawing from the Russian market. We will make sure that the elites, proxies and oligarchs that support President Putin’s war are deprived of their access to luxury goods and assets. The elites who sustain Putin’s war machine should no longer be able to reap the gains of this system, squandering the resources of the Russian people.
Seventh, Russian entities directly or indirectly supporting the war should not have access to new debt and equity investments and other forms of international capital. Our citizens are united in the view that their savings and investments should not fund the companies that underpin Russia’s economy and war machine. We will continue working together to develop and implement measures that will further limit Russia’s ability to raise money internationally.
We stand united and in solidarity with our partners, including developing and emerging economies, which unjustly bear the cost and impact of this war, for which we hold President Putin, his regime and supporters, and the Lukashenko regime, fully responsible. Together, we will work to preserve stability of energy markets as well as food security globally as Russia’s invasion threatens Ukraine’s capacity to grow crops this year.
We continue to stand with the Ukrainian people and the Government of Ukraine. We will continue to evaluate the impacts of our measures, including on third countries, and are prepared to take further measures to hold President Putin and his regime accountable for his attack on Ukraine.
Firefighters spray water on a destroyed shoe factory following an airstrike in Dnipro in central Ukraine
What does ‘energy independence’ mean?
Both Democrats and Republican lawmakers are calling for a path to American energy independence, though they have different ideas about how to get it done.
To be ‘energy independent’ means to export more oil, gas and coal than is imported each year.
In theory it could also describe a nation that exclusively exists on its own fuel sources — though with a vast number of global transit lines and how natural resources are distributed around the country, the latter definition is near impossible to achieve in the US.
Americans consumed roughly 20 million barrels of liquid fuel per day in 2021, according to the Energy Information Administration.
The United States exported an average 8,632 barrels of crude oil and petroleum per day last year.
And as of February 25, the EIA stated there were 580 million barrels in the strategic reserve.
However even if the US were to produce more oil than it buys — as was the case in 2020 — it would still be far costlier and more cumbersome for energy companies to sell that oil in parts of the country.
For example, the Wall Street Journal points out that oil companies shipped about 3 million barrels per day out of the US Gulf Coast.
Pipelines from the Gulf Coast lead to the southwestern Permian Basin and the crude oil storage hub in Cushing, Oklahoma that’s home to 14% of total US oil storage.
Thanks to the 1920 Jones Act, US companies are limited in the size of ships they can use to transport goods between domestic ports.
That effectively makes it costlier for oil to be shipped from there to the East and West Coasts, for example, which have more direct access to overseas markets.
Biden’s administration has punished Putin’s invasion with a series of increasingly harsh economic sanctions that have targeted Putin himself, his inner circle, the oligarchs who made billions off Putin, and several Russian companies.
The Kremlin responded by accusing the U.S. of starting an ‘economic war.’
These sanctions have led to the Russian ruble losing 76% of its value against the U.S. dollar over the past month.
The International Monetary Fund is now predicting that Russia will plunge into a ‘deep recession’ this year.
And, on Tuesday, Biden announced the U.S. would ban imports of Russian oil and gas products.
Biden said the ban would ‘deal another powerful blow to Putin’s war machine’ after a vast number of sanctions targeting Russia’s financial institutions and top officials were already levied in coordination with other western governments.
Oil imported from Russia amounts to less than 10 percent of the United States’ oil imports, whereas many European countries rely on Russia’s supply.
This week the price of gasoline set new all-time records for three consecutive days, hitting a national average of $4.32 on Thursday, but those increases will only show up when March inflation data is released.
The president admitted that the Russia oil ban would impact American drivers as well, saying: ‘The decision today is not without cost here at home. Putin’s war is already hurting American families at the gas pump.
‘Since Putin began his military buildup on Ukrainian borders, just since then, the price of the gas at the pump in America went up 75 cents.’
‘And with this action it’s going to go up further. I’m going to do everything I can to minimize Putin’s price hike here at home,’ he said, explaining that he made the decision in consultation with European allies – though they may not join the US in the oil ban.
‘We’re moving forward this ban understanding that many of our European allies and partners may not be in a position to join us,’ Biden said. ‘The United States produces far more oil domestically than all of the European countries combined. In fact, we’re a net exporter of energy. So we can take this step when others cannot.’
In fact, data from the Energy Information Administration show the US shifted to being a net importer of petroleum in 2021, and projected the same for 2022 last month. US oil production peaked under the Trump administration in 2019, before falling 8 percent the next year.
The US is now the world’s top oil producer, with much of its imported oil coming from Canada.
The European Union is also aiming to cut its reliance on Russian gas by nearly 80 percent by the end of this year and the United Kingdom is expected to ban Russian oil.
Biden’s move comes as Americans are facing record high prices for gas, food and rent.
The White House has tried to blame Putin and his invasion of the Ukraine for inflation.
On Thursday, the consumer price index hit another 40-year high of 7.9 percent in February, which Biden called ‘Putin’s price hike.’
And Treasury Secretary Janet Yellen said next month will see another record high inflation number, saying the economic sanctions being place on Putin, his inner circle and Russian companies would have an effect back home.
‘My guess is that next month, we’ll see further evidence of an impact on us. Inflation of Putin’s war on Ukraine,’ she told CNBC on Thursday.
‘We’ve designed these sanctions to have the maximum impact on Russia, while mitigating fallout for everyone else, including the United States. But it’s not realistic to think that we can take actions of this magnitude without feeling some consequences ourselves,’ Yellen said.