A residential building destroyed by a Russian missile in July, in Kyiv, Ukraine. Photo / Oksana Parafeniuk, The New York Times
What kind of power can the United States exert to punish other countries for their misdeeds? The answer, in the age of nuclear weapons, has been economic power.
Impose sanctions and cut off access to the US dollar, the thinking goes, and the excruciating economic pain will force a rogue country to play nice.
And yet Russia — by some measures the most sanctioned country on Earth — shows little urgency to do what the US and European nations want: End its war in Ukraine.
Since Russia’s full-scale invasion in 2022, the US has put more than 6000 individuals and companies with ties to the Russian war effort on the official sanctions list.
For these prohibitions to work, the financial institutions that move money across borders must screen transactions and cut off illicit activity. If they don’t, they could face steep penalties from the US, including fines or exile to the sanctions list themselves.
Nonetheless, Russia has managed to conduct hundreds of billions of dollars in cross-border trade.
One reason could be that the financial institutions necessary to facilitate that trade are not being found and punished.
A New York Times analysis found that eight of the 10 largest settlements for global sanctions violations since 2014, when sanctions were first imposed on Russia over its annexation of Crimea, were against financial institutions.
Only two of those cases involved Russia: one against a venture capital firm that managed money for a Russian oligarch who was under sanctions and another against Binance, a cryptocurrency exchange.
And Binance was not primarily fined for helping Russia; it had also greased the financial pathway for other countries facing sanctions, including Iran, North Korea, Syria, and Cuba.
As for the more than 6000 entities on the Russian sanctions list, most are individuals and small shell companies; fewer than 30 are large firms based outside of Russia, and only five of those are financial firms.
Bringing down the hammer on financial firms that are helping Russia’s war machine has become only more complicated as the war in Ukraine has progressed.
Cut off from much of the Western world, Russia has forged deeper ties with India and China, large economies that provide an economic lifeline.
“There are many companies around the world that have violated secondary sanctions threats,” said Edward Fishman, a senior research scholar at Columbia University and a former Treasury Department official.
But, he added, “do you really want to strain your relationship with the UAE or China?”
If sanctions were placed on major Chinese banks, international trade would slow considerably.
Many American companies would be unable to pay Chinese factories for goods or receive payments for their own exports.
Supply chains for everything from electronics to pharmaceuticals could freeze up, sending prices soaring for American consumers.
This calculus has made Chinese banks nearly “unsanctionable”, according to Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics.
“Sanctioning a large Chinese financial institution,” he said, “could lead to global financial instability.”
Exemptions and evasions
There was a time when being on the sanctions list was like a financial death sentence. The list, a 3000-page document on the Treasury Department’s website, dates back to the 1960s.
Not only are the entities barred from doing business with the US, they cannot interact with banks that use US dollars. Because the US dollar is the currency most widely used for international transactions, that ban effectively cuts them off from the global financial system.
Twenty years ago, the Office of Foreign Asset Control mostly dealt with small-time violators, handing out fines that averaged a few thousand dollars for offences like smuggling Cuban cigars, according to an analysis of government records.
But then the sanctions programme grew from a niche tool into a centrepiece of US foreign policy.
From 2002 to 2019, the average settlement grew 400-fold. Multibillion-dollar penalties against global financial institutions that facilitated sanctions evasion — even inadvertently — became normal.
In 2014, French bank BNP Paribas paid the US nearly US$9 billion ($15.3b) for having processed transactions on behalf of Sudanese, Iranian and Cuban entities.
Few big penalties have been issued since 2019, however, when the US fined Standard Chartered, a British bank, nearly US$1b for violating anti-money-laundering regulations.
Fearing enormous fines, global banks invested billions in compliance departments, which cut off suspicious transaction activity and severed ties with entire countries deemed too risky.
The sanctions list swelled in 2022 with the names of Russian oligarchs, yachts, and private jets. Each update is instantly added to databases maintained by financial institutions worldwide, allowing them to block transactions.
The Office of Foreign Asset Control is good at finding nefarious shell companies and individuals and adding them to the sanctions list, said Kimberly Donovan, director of the economic statecraft initiative at the Atlantic Council and a Treasury Department official in the Biden Administration.
Bringing cases against large banks for violating those restrictions “is a lot more difficult.Frankly it comes down to resources.”
This has been the case under Democratic and Republican administrations.
For decades, “you had a significant swathe of humanity that was terrified of being on the wrong side of sanctions”, said Daniel Tannebaum, a former Treasury official who now leads anti-financial crime efforts at Oliver Wyman, a consulting firm. “Companies have short memories, and have forgotten some of the pain.”
A Treasury spokesperson blamed the drop in sanctions enforcement on the Biden Administration but offered no explanation for why it was not addressed in US President Donald Trump’s first term and gave no examples of how enforcement has shifted in Trump’s second term.
The US can investigate banks that are suspected of violating sanctions, a process that can take years to complete. Such cases may end in steep fines, but the far greater threat is the Treasury’s power to cut a bank off from the dollar.
Sanctions were imposed on Russia’s VTB Bank in February 2022, and it was kicked off the interbank payment system called Swift.
Swift is the global messaging network that enables banks worldwide to communicate and process international money transfers, and without access, VTB should have been isolated from global finance.
However, the bank, which has expanded its China presence in recent years, seems to have found at least one workaround: It advertised that account holders could transfer up to 1 million roubles (roughly US$10,000) daily into their accounts on Alipay, a giant Chinese payment platform. VTB said there would be “instant enrolment” and funds available within one business day.
This could create a backdoor into the global financial system.
Russian customers move roubles from VTB to Alipay and, once in Alipay, those funds can flow anywhere internationally, effectively washing the roubles into the broader economy and neutralising a major Western sanction.
Ant Group, the owner of Alipay, denied that it had any ties to VTB. After the New York Times sought comment from Ant and VTB, references to Alipay disappeared from VTB’s website, which now tells customers that they can transfer money to “popular Chinese wallets”.
VTB did not respond to multiple requests for comment and did not address questions about whether the bank relies on Chinese intermediaries to facilitate the transfers to Alipay.
In his final weeks in office, President Joe Biden did target some payment channels between China and Russia, putting nine Chinese companies involved in facilitating transactions on the sanctions list. But these were mostly shell companies and small trading houses — not payment giants like Alipay.
In recent months, the European Union has placed sanctions on two regional Chinese banks for facilitating transactions with Russia.
But Europe lacks the financial leverage to enforce sanctions globally, said Maria Snegovaya, a senior fellow at the Centre for Strategic and International Studies.
“They don’t really have a lot of mechanisms to make sure the sanctions are followed,” she said.
This article originally appeared in The New York Times.
Written by: Aaron Krolik
Photographs by: Oksana Parafeniuk
©2025 THE NEW YORK TIMES