The American president, in agreement with the G7 and the European Union, has decided to exclude Moscow from the normal regime of reciprocity governing world trade relations.
Joe Biden, together with the G7 and the European Union, has decided to exclude Moscow from the normal reciprocal regime governing world trade, which opens the way for the imposition of punitive tariffs 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 on the world stage,” Trump said from the White House on Friday. In addition, he announced the ban on imports of “flagship sectors of the Russian economy, including seafood, vodka and diamonds”.
In the wake of this announcement, the Department of Commerce announced a ban on exports of luxury goods, including jewelry, cars, clothing and antiques, to Russia and Belarus. “We will not allow (Vladimir) Putin and his friends to continue to live in opulence while causing enormous suffering throughout Eastern Europe,” said US Commerce Secretary Gina Raimondo.
Moscow had until then enjoyed a so-called “most favored nation” trade status, which facilitated free trade in goods and services. Russia thus joins Cuba and North Korea, the only countries which were hitherto excluded by the world’s leading power from the principle of reciprocity which is the basis of most international trade relations.
The final decision on this new sanction rests with the United States in Congress. Elected Democrats and Republicans, very united on this issue, have already signaled their support for the cessation of normal trade relations with Russia. The most-favoured-nation clause – which in the United States is known as the “normal permanent trade relationship” – is a pillar of free trade. In particular, the World Trade Organization (WTO) requires that any trade advantage – such as a reduction in customs tariffs – granted by one member be automatically applied to all the others. Moscow, which joined the WTO in 2012, has since benefited from this regime.
Heavy blow to the Russian economy
Trade between the United States and Russia is limited but it is a new blow to the Russian economy. Last year, the United States imported some $30 billion worth of Russian products – including $17.5 billion worth of crude oil, a commodity on which Washington has just imposed an outright embargo.
This new sanction is in addition to several salvoes of Western measures intended to gradually cut 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 the Russian economy, to the point that the country is now, according to the Fitch agency, threatened with default.
Kristalina Georgieva, managing director of the International Monetary Fund, herself stressed on Thursday that this was no longer “an unlikely event”. She also stressed that Russia was going to experience “a deep recession”. The ruble is breaking records of weakness while many Western companies have suspended their activities in the country.
The war in Ukraine also has consequences for the entire world economy, which is barely recovering from the Covid-19 pandemic, due in particular to the explosion in the price of raw materials. Joe Biden, who has stacked sanctions, is under intense domestic political pressure to do more. It is in this context, for example, that he decided to ban imports of Russian oil into the United States, a measure demanded of him by Congress and which, for the first time, was taken without coordination with the Europeans.
The pressure also comes from Ukraine, which urges Washington to hit Russia harder in the wallet, failing to intervene militarily, which Joe Biden has categorically excluded. “I know that the United States is doing everything it can for the moment but (…) we really want to see a lot more measures being introduced,” Oleg Ustenko, the Ukrainian president’s economic adviser, said on Friday. CNN.