We’ve been saying that the United States has threatened economic sanctions against all the countries and banks in the world. The Press now officially agrees.
IRS – The US Economic Weapon to Be Unleashed on Russian Banks
US to unleash IRS on Russian banks
The new law means that Russian banks that buy U.S. securities after July 1 will forfeit 30 percent of the interest and dividend payments. The withholding applies to stocks and bonds, including U.S. Treasuries. Some previously owned securities would be exempt from the withholding, but in general, previously owned stocks would not.
There is of course a simple solution: Don’t invest in the United States. I’ve been saying this for three years now.
I also divested of all US assets years ago and advise others to do the same.
Of course, the really painful bit for many countries will be the commodities that are traded in dollars.
As a sanction it is pretty crude (definitely not a ‘smart’ or targeted sanction, more of a dumb sanction).
I would add top-end luxury flats in London to the list of asset bubbles being created.
Hisconfusion is understandable because, a lot of things don’t have treaty status. Presidents are really good at getting around that requirement and have been for some time. .
“We treat our friends as badly as we treat our worst enemies. If you try to help us by investing in our economy there’s a pretty good chance we will come up with a scheme to steal a big chunk of your money. Don’t feel hurt, we treat everybody this badly.” Fabulous comment, OMG!
Thank you, Just Me, for alerting the author of the article to the fact that the FATCA missile is aimed at the whole world. The Russians aren’t getting any worse treatment than the rest of us. … unless, you can call the withholding of the opportunity to sign away their country’s sovereign rights as worse treatment.
FATCA as an economic weapon:
Reuters: “U.S. officials working on new sanctions on Russia over Ukraine”
“Washington also wants to punish Moscow by refusing to negotiate over a tax agreement that, if not approved by July 1, could mean steep penalties for Russian banks. Talks were suspended last month over an agreement to help Russian financial institutions comply with 2010’s U.S. Foreign Account Tax Compliance Act (FATCA).
Assistant Treasury Secretary Daniel Glaser assured lawmakers there were no plans now to resume those negotiations.”
Russia may turn the ruble into a hard currency, showing that the Obama administration does not hold all international banking sanction cards.
Reuters: “Russia, wary of sanctions, wants exporters to be paid in roubles”
Wed May 14, 2014 11:15am EDT
“KALININGRAD, Russia, May 14 (Reuters) – Russia, keen to dodge threatened Western sanctions on its companies over the Ukraine crisis, said on Wednesday it was looking at ways for major state-owned exporters such as energy giants to be paid in roubles.
The idea of major exporters being paid in roubles rather than dollars has been gaining ground in recent weeks in response to sanctions imposed by the West on officials and companies over Russia’s annexation of Crimea and an uprising in Ukraine’s east.
“There are certain risks, but we are preparing a mechanism, we are working on it,” Finance Minister Anton Siluanov told reporters during a visit to Russia’s Baltic enclave of Kaliningrad.
“There are certain costs for exporters and for the buyers of our export products because they will have to buy roubles, and the rouble is now somewhat volatile, plus there is the payment of commission,” he said.
Kostin referred to “calls by high-ranking Western leaders to isolate Russia, practically destroying the Russian banking sector, using modern ‘nuclear weaponry’ – dollar payments,” he told a conference, in comments cited by the Vedomosti newspaper.”
Russia threatens to stop transporting US astronauts to space station, suggests they use a trampoline instead:
Daniel W. Drezner of Tufts University’s Fletcher School of Law and Diplomacy notes in his recent Washington Post op-ed “Five myths about sanctions”:
Good thing that Washington has bravely stepped forward to establish the new international norm of using tax withholding against foreign investors not just for purposes of tax enforcement against people who happen to live in the same country as them, but as a form of sanctions to achieve political goals. After all, no one would possibly think to use that same tactic against the United States!