The United States and Its Allies Ban Russia From International Trade

Russia will be stripped of its “most favored nation” status, which would pave the way for tariff hikes.

The United States and its allies have stepped up their escalation of sanctions against Moscow, paving the way for punitive tariffs and drying up trade with the country, in response to the invasion of Ukraine.

“The United States, our allies and partners continue to work together to increase economic pressure on (Vladimir) Putin and further isolate Russia from the global stage,” the US president said Friday from the White House. The EU and the G7 have joined Washington in revoking the so-called status of “most favored nation” Moscow, which facilitates free trade in goods and services.

Joe Biden also announced a ban on imports of “flagship sectors of the Russian economy, including seafood, vodka and diamonds”† In the wake of this announcement, the US Department of Commerce announced a ban on the export of luxury goods, including jewelry, automobiles, clothing and antiques, to Russia and Belarus. “We will not allow (Vladimir) Putin and his friends to continue to live in opulence while causing immense suffering throughout Eastern Europe.’, US Secretary of Commerce Gina Raimondo justified. The European Union has followed Washington’s lead and in turn has announced a ban on its own luxury goods.

Cut off from the global free trade game

By robbing Russia of its “most favored nation clause”, a principle of reciprocity that is the basis of free trade, de facto cut off Westerners from the global game of free trade, and give themselves the right to heavily tax imports of Russian products. This clause, applied by the World Trade Organization (WTO), of which Russia has been a member since 2012, requires that any trade advantage – such as a reduction in customs tariffs – granted by one member is automatically applied to all others. The United States, for example, respects this principle with all its trading partners, with the exception of two countries, which Russia thus joins: Cuba and North Korea.

The final decision on this new sanction rests with the US side in Congress, which should be a formality as Democrats and Republicans have already expressed their support for ending normal trade relations with Russia. The House of Representatives will vote next week.

Press Russian oligarchs

Washington, which increased pressure on Russian oligarchs and those close to Vladimir Putin, also expanded on Friday the list of personalities targeted by individual sanctions, i.e. whose assets will be frozen in the United States, and of who transacts with a US person or entity. The US Treasury Department will thus punish, among others, the wife and two adult children of Dmitri Peskov, the loyal spokesman for Vladimir Putin, who was himself already targeted. “They all have a luxurious lifestyle that is hardly compatible with the salary of a high-ranking official in Peskov and certainly based on the ill-gotten riches resulting from the Peskov-Putin relationship.”the US government notes. The United States has also included businessmen on its list, as well as members of the State Duma, the Russian parliament.

Standard risk

All this contributes to several salvos of Western measures designed to gradually sever the economic and financial ties of the country led by Vladimir Putin with the rest of the world. These sanctions have already had a devastating impact on Russia’s economy, to the point that the country is now threatened with default, according to the Fitch agency.

Kristalina Georgieva, general manager of the International Monetary Fund, herself emphasized on Thursday that it was no longer the case “an unlikely event” and warned that Russia would experience “a deep recession”† The war in Ukraine is also affecting the entire global economy, which is barely recovering from the Covid-19 pandemic, mainly due to the explosion in commodity prices.