Financial flows to Russia are drying up as global banks fear losing access to the US dollar, Treasury official says

Financial flows to Russia are drying up as global banks fear losing access to the US dollar, Treasury official says
Russia's President Vladimir Putin.Artem Geodakyan/POOL/AFP via Getty Images
  • The deputy treasury secretary, Wally Adeyemo, says the threat of secondary sanctions is working.
  • Finance flows to Russia have withered as global institutions don't want to lose dollar access.

The threat of secondary sanctions on financial institutions that help Russia bypass its own restrictions is proving effective, the US deputy treasury secretary, Wally Adeyemo, has told Reuters.

Data cited by the Treasury shows financial flows between Russia and several countries, such as Kazakhstan, Turkey, and the United Arab Emirates, have meaningfully decreased.

That's after an executive order was signed last December, giving the US leeway to sanction non-Russian institutions that facilitate restricted transactions with Moscow or are tied to the country's military industry.

"We are sending an unmistakable message: Anyone supporting Russia's unlawful war effort is at risk of losing access to the US financial system," the national security advisor, Jake Sullivan, then said about the order.

Adeyemo said at-risk institutions had since turned more cautious, and some had shown concern about losing access to the US dollar. The currency accounts for nearly half of global financial transactions.


"From their CEOs on down, they started requesting meetings with us to say, 'What can we do to make sure that we keep access to the dollar,'" he told Reuters, adding that large banks were also part of the discussion: "Because ultimately for them, even though they may do some business with Russia, it pales in comparison to the amount of business they do with the United States or the business they do in the dollar."

Last week, Reuters cited the December order for complicating payments between Turkey and Russia on energy-supply purchases as Turkish banks tighten compliance. Meanwhile, three of China's Big Four state banks have stopped accepting payments from Russian counterparts in fear of secondary sanctions.

On Friday, Washington doubled down with a slew of new restrictions on Moscow, with the White House targeting 500 individuals and entities in countries including Russia, China, and the United Arab Emirates.

So far, no financial institution has been targeted based on the December order.

Sergei Guriev, an economist, recently said that while the Kremlin had been successful in circumventing the worst impacts of Western sanctions with the help of bank intermediaries in other countries, it was paying to do so through intermediary fees.


More pressure is set to come from the European Union as well after members have agreed to sanction firms in China and India over their ties to Moscow.