Vladimir Putin's allies abandoning Russia's tanking economy amid US sanctions

Russia‘s longtime allies are finally abandoning them as the US tightens its grip on Vladimir Putin‘s country with stronger economic sanctions.

Countries such as China, Turkey, the UAE, and India have all begun distancing themselves from Russia amid growing sanctions for their war on Ukraine.

There are concerns in these countries that the US may impose secondary sanctions on them for their allyship to Russia, as they take actions to cut economic ties.

The US Treasury Department said they have all been used by Russia as lifelines to keep their economy afloat during the war as they try to get around stringent sanctions.

A December executive order issued by Joe Biden gave the US the power to sanction foreign banks involved in significant transactions with Russia, as his administration threatened to block the banks involved from its financial system.

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Following this announcement, Treasury Secretary Janet Yellen said: “We expect financial institutions will undertake every effort to ensure that they are not witting or unwitting facilitators of circumvention and evasion.

“We will not hesitate to use the new tools provided by this authority to take decisive, and surgical, action against financial institutions that facilitate the supply of Russia‘s war machine.”

In China, multiple large banks no longer take payments from sanctioned Russian financial institutions over fears of recieving sanctions of their own.

In Armenia and Kyrgyzstan, cards using the Russian Mir payment system are also no longer accepted. Russia was forced to adopt this sysatem after Visa and Mastercard stopped operating in the country after the war in Ukraine broke out.

India used to be one of the main buyers of Russian oil, but now they have stopped paying for it. This comes amid Russian fears for its oil firms as they experience month-long payment delays from their former allies.

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In the UAE, Abu Dhabi Bank and Dubai Islamic Bank have suspended multiple accounts with links to Russia, while banks that still operate with such accounts face major delays.

Reuters reported that banks in China, the UAE and Turkey have realized that the “threat of US secondary sanctions is real,” according to sources in banking and trading.

US-imposed sanctions on Russia have only become mroe strict since Putin launched his invasion of Ukraine in February 2022, and they have significantly hit its economy.

The economy tanked after it was cut off from the SWIFT (Society for Worldwide Interbank Financial Telecommunication) banking system at the same time its foreign exhcange reserves were frozen.

One month into the war, Biden banned Russian oil imports, hitting the “main artery” of its economy. Insuring, financing, and shipping Russian seaborne oil was also price capped at $60 (£47) a barrel by the G7, the EU, and Australia.