While Russia is likely to move closer to China to make up for the loss of goods and services it would normally get from the West, Smith said, “they are also betting that their huge energy supplies will continue to be in demand, “especially in this cold winter. There’s a lot more profit to be had from their energy if they can get it to market.”
Last month, Russia and China signed a 30-year agreement that will allow Russia to supply gas to China, although the pipelines to transport that gas will not be completed for at least three years. In addition, China announced last week that it would allow wheat imports from all regions of Russia for the first time.
However, Smith said the Chinese and others would “do incredibly difficult business” now that Russia has fewer willing buyers, and China will want to avoid being subjected to secondary sanctions or enforcement. sanctions violations.
On Monday, the United States further tightened its sanctions to immobilize all assets of the Russian Central Bank in the United States or held by Americans. The Biden administration estimated the move could impact hundreds of billions of dollars in Russian funding.
The latest measures included an exclusion that allows energy-related transactions with the bank. Sanctions also have no impact on Russia’s stockpile of gold, which Putin has been accumulating for several years.
Tyler Kustra, an assistant professor of politics at the University of Nottingham who has studied economic sanctions, said Moscow had already adopted a “Russian fortress economy” – producing many goods domestically even though it was easier to import them – to protect the economy from sanctions.
Much of Russian food is produced locally, but some of it does not match similar products made abroad, while others cannot be replaced, he said.
“My friends in Moscow say, ‘Listen, they’ve never really been able to make cheese,'” Kustra said.
Increased reliance on cryptocurrency will be an inevitable way for Russia to try to support its financial transactions, said David Szakonyi, professor of political science at George Washington University, “but it is unlikely to serve substitute for business transactions over time.
While roughly 80% of Russia’s financial transactions in the past have been conducted with the dollar, federal and treasury law enforcement officials are stepping up efforts to “aggressively combat” the misuse of the dollar. cryptocurrency to evade sanctions, according to a White House official who was not authorized to comment publicly and spoke on condition of anonymity.
The official would not comment on whether the Biden administration plans to target Russian-based crypto exchanges for sanctions.
The administration has experience in regulating Russian crypto activities. Earlier this year, the Treasury sanctioned Russia-based SUEX and 25 affiliated cryptocurrency firms, blacklisting the exchange from the dollar financial system, for allegedly helping hackers clean up and cash out their booty. It was the first crypto firm to receive this designation.
Ari Redbord, a former senior treasury adviser who leads government affairs at TRM, which among other things develops financial crime analytics, said his organization had identified at least 340 companies in Russia that could potentially be used as “crawling ramps.” access and egress” for cryptography. currency.
Redbord said that due to the scale of the sanctions, the amount of crypto Russia would need to replace the billions in sanctions “would be very difficult to turn into traditional currency.”
Ori Lev, who served as an enforcement officer at the Treasury’s Office of Foreign Assets Control during the Obama administration, said that overall, “whether it’s using cryptocurrency or rely on China, there are mitigating measures they can take, but they cannot recreate the financial system.”
The Biden administration has argued that China will not be able to make up for the loss of US and European businesses and that sanctions cutting off Russia from Western sovereign debt markets will be crippling. At the same time, the White House has sought to make a public case that Beijing coming to the aid of Moscow could damage China’s reputation in Europe and around the world in the long term.
On Monday afternoon, the ruble had cratered and Russians queued for hours at ATMs as inflation fears exploded.
“I don’t know what specific steps they’re going to take to ease the bite of the sanctions, but that’s not going to undo them,” Lev said.
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Associated Press writers Aamer Madhani, Alan Suderman in Richmond, Virginia and Kelvin Chan in London contributed to this report.
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