Washington Financial Warriors Worry Their Assault on Russia Could Backfire

March 9, 2022 (EIRNS)—Politico ran a lengthy policy op-ed on March 8 by Julia Friedlander headlined, “The West Has Declared Financial War on Russia. Is It Prepared for the Consequences?” Friedlander is a director at the Atlantic Council (which has been functioning as a kind of planning headquarters for war against both China and Russia), and she was a sanctions and financial warfare expert in both the Obama and Trump administrations, working in the Office of Terrorism and Financial Intelligence at the Treasury Department.

Friedlander opens with a simple point: “Every morning since Russia’s invasion of Ukraine, when markets open, analysts watch two things simultaneously: the advance of Russian troops on one screen and the value of the ruble on the other, two battle fronts in the same confrontation.” What started as a policy of simple sanctions against Russia, “has now shifted to driving the country into the ground.” This has included “severing Russia’s access to nearly $400 billion, or over 60% of [foreign exchange] reserves, overnight.”

All of this goes way beyond anything President Trump did, she explains. “The West’s response is no longer just pressure—it’s financial war.” But the big question is: “Can the U.S. and its partners wreak enough havoc on the Russian economy in time to make war unsustainable? No one can answer that.” This is “a high-stakes gamble over European security, in real time, through financial and economic means.”

Friedlander then warns that if the current gamble fails, it could mean that the entire sanctions/financial warfare policy “could lose its legitimacy.... This may be the last time a strategy based on locking up currency may be feasible.”

Friedlander continues: “What happens now? The West’s sanctions strategy is a race against the clock—or rather, two clocks racing against each other. One clock is financial—how long it takes to bring the world’s 11th-largest economy to its knees—and one is military, how long Russia needs to defeat Ukrainian forces....

“In the coming weeks, market-watchers are likely to record a cliff-drop in the value of the ruble as Russia leverages its remaining financial resources to fend off a currency crisis. Bond yields will rise and credit ratings will fall, triggering fears that Russia is reaching default, especially as bonds reach maturity this month.... Financial and debt contagion could pop up in unforeseen places.... This is likely to begin in Central Asia, where economies are closely bound by finance and trade to Russia.... The collateral damage of the current strategy could be larger than we know.”