In the latest response to Russia’s conflict in Ukraine, US President Joe Biden has placed a ban on Russian diamonds, seafood, and vodka imports.
Russia’s position as an equal trading partner will be revoked by the United States, the European Union, and other allies, clearing the door for more economic sanctions.
The steps add to the economic isolation that Russia has faced since the invasion.
Its currency has depreciated, and international companies are fleeing the country.
Western sanctions on banks and oligarchs have been compared by Russian President Vladimir Putin to a declaration of war. Moscow has also threatened to nationalise enterprises or industrial sites if activity has been halted.
On Friday, Western allies vowed more economic punishment.
The European Union said that it will prohibit imports of important Russian iron and steel goods as well as new energy projects, while the United Kingdom imposed penalties on hundreds of Russian lawmakers.
The United States, the European Union, and the United Kingdom have also said that they will halt supplies of luxury items to Russia.
The next actions, according to Biden, will be “another devastating blow to the Russian economy.”
Designating a country as a “most favoured nation” gives reciprocal trade benefits such as lower tariffs and border fees, according to international standards.
The removal of Russia’s special status allows for increased tariffs on critical products such as mineral fuels, fertilisers, and metals.
Biden said he was working with the European Union and other advanced countries, such as Canada and Japan, to coordinate the preparations.
In the United States, Congress, which must act before the move can take effect, has already expressed its support for it.
Membership in the World Trade Organisation confers the title of Most Favoured Nation (MFN). It may appear that it provides exceptional benefits, but this is not the case.
In fact, it is a baseline designed to ensure all World Trade Organisation members are treated equally, unless they are members of a specific free trade area or agreement. Under normal circumstances, it limits countries’ ability to impose trade barriers against one another – or offer individual countries special concessions.
By losing Russia’s special status, G7 countries will be allowed to impose punitive tariffs or levies on its exports. In fact, Canada, one of them, has already done so. It imposed 35 percent tariffs on all imports coming from Russia and its obedient partner, Belarus, last week.
To do so, Canada invoked a provision in one of the WTO accords that empowers members to take actions they deem necessary to preserve their “essential security interests.” It’s probable that the others will follow suit.
Furthermore, Western allies have stated that they want to deny Russia access to international financial institutions such as the World Bank and the International Monetary Fund.
“Russia cannot grossly violate international law and expect to benefit from being part of the international economic order,” the G7, a group of seven advanced economies including the UK, said in a statement.
According to the White House, the US prohibition on essential Russian imports will cost Putin more than $1 billion in income, while the ban on US luxury goods exports will cost $550 million per year.
This is a small portion of the $28 billion in commerce between the US and Russia in 2019.
Additional steps, including tighter penalties on oligarchs and their families, were pledged by Biden.
“We’re going to continue to squeeze Putin,” Biden said. “He is the aggressor and… must pay the price.”
According to economists, the already imposed sanctions will plunge Russia into a catastrophic economic crisis this year. However, it is unclear if Putin’s military aspirations have changed as a result of the economic crisis.
During a news briefing on Thursday, White House spokesperson Jen Psaki was asked if the severity of the penalties would cause Putin’s behaviour to alter.
“Our objective of course is to bring an end to this conflict, she said. “In terms of when that will happen, I’m unfortunately not in the mind of President Putin…. When it will change his calculus, I can’t give a prediction of that.”
(Adapted from BBC.com)