WASHINGTON (AFP) – The United States (US) and its allies moved on Friday to end normal trade relations with Russia, as US President Joe Biden vowed the West would make Russian President Vladimir Putin “pay the price” for his invasion of Ukraine.
Biden announced the new step, which would enable Western nations to inflict steep tariff hikes on Russian goods, in coordination with North Atlantic Treaty Organization (NATO) allies, the Group of Seven (G7) and the European Union (EU).
Washington and Brussels also said they would cut off exports of luxury goods to Russia in what EU chief Ursula von der Leyen described as a “direct blow to the Russian elite”.
Biden warned in his speech at the White House that “Putin must pay the price” as the “aggressor” in the war with its ex-Soviet neighbour.
US lawmakers – who would have the final say – have already indicated they support stripping Russia of the preferential status that ensures equal treatment between international trade partners.
In a statement issued in Berlin, G7 leaders confirmed they would each “endeavour” to take action to deny Russia favoured trade status.
“The US and our allies and partners continue in lockstep to ramp up the economic pressures on Putin and to further isolate Russia on the global stage,” Biden said.
Putin “cannot pursue a war that threatens the very foundation of international peace and stability and then ask for help from the international community.”
A key principle of the World Trade Organization (WTO), the so-called most favoured nation status known in the US as permanent normal trade relations (PNTR), requires countries to guarantee one another equal tariff and regulatory treatment.
Stripping Moscow of the designation, granted in December 2012, would allow Biden to impose steep tariffs on Russian goods or restrict imports. The president also announced a ban on imports of diamonds and seafood into the US.
Later in the day, the US Treasury announced a raft of new sanctions targetting “elites and business executives who are associates and facilitators of the Russian regime”.
These include family members of Putin’s spokesmen, board members of sanctioned bank VTB and 12 members of the Lower House of the Russian Parliament.
The latest trade sanctions cap several rounds of measures intended to sever Russia’s economic and financial ties with the rest of the world over its invasion of Ukraine.
They have included banning Russian oil imports, seizing the assets of billionaires tied to Putin, and freezing the nation’s stockpile of cash.
Together, the moves have already pushed Moscow to the brink of a debt default.
The steps have also caused prices for key commodities, like gasoline and wheat, to soar, harming US consumers already facing the highest inflation in four decades.
Trade experts are however dubious about whether new tariffs will be effective.
“US direct trade with Russia is relatively small, so higher tariffs would not do much damage to them but could raise costs for our manufacturers who rely on them for key raw materials,” said William Reinsch of the Centre for Strategic and International Studies in Washington.
“The additional damage this does to the trading system, while not immediate, could be significant,” he said in an analysis.
The US imported just under USD30 billion in goods from Russia last year, including USD17.5 billion in crude oil.