The ruble has rebounded and is now worth more than before the invasion. The Kremlin’s coffers are overflowing from record oil and gas sales. Even McDonald’s has reopened in Russia, rebranded under a Siberian billionaire’s ownership. Meanwhile, Russia’s military continues to hammer away at Ukraine with a steady supply of tanks and artillery.
But inside the Treasury Department, teams of sanctions experts view that resilience as a mirage. In exclusive interviews with CNN, top Treasury Department officials say they remain confident the sanctions are working and that beneath the surface, a much more dire story is unfolding within Russia’s economy, where they contend real and lasting damage is being inflicted.
“The US government has watched a narrative of ‘Look at Russia — look at the high value of the ruble, wow, Russia has really got these sanctions beat!’ and we’ve been like, ‘No!’ That’s the wrong message to take,'” said a senior Treasury official, detailing the months of work they have spent crafting sanctions against Russia.
As top US military officials in the Pentagon watch the hot war unfold in Ukraine, a new era of economic warfare is underway. It’s being waged by government lawyers, accountants, economists and finance whizzes toiling away in secure rooms lining the bowels of the Treasury Building and in the quiet confines of offices accessible by an underground tunnel just across Pennsylvania Avenue.
“They’re like our nerd warriors,” one senior administration official said with a bemused grin.
Compared with splashy moves like seizing oligarchs’ yachts and sanctioning President Vladimir Putin’s alleged girlfriend, the complicated maneuvers intended to destroy the pillars of Russia’s economy have come with relatively little fanfare.
As the Kremlin has moved to tout signs of economic stability, Treasury officials have taken more aggressive actions, including a series of subtle steps late last month that froze trading in Russian bonds and will almost certainly lead Moscow to default on its government debt for the first time since the Russian Revolution in 1918.
Still, Putin continues to suggest the sanctions aren’t working, saying in a speech on Friday that the West’s attempts to “crush” the Russian economy “were not successful.”
“There’s been a lot of energy to say this is all artifice,” said Andrea Gacki, director of the Treasury Department’s Office of Foreign Asset Control, which serves as the tip of the spear for US economic statecraft.
“But it’s all smoke and mirrors,” Gacki said in an interview from her office overlooking Lafayette Square. “All the real indicators show weakness.”
‘Zero day’ arrives
Just before midnight on February 23, not long before the first Russian missiles began landing across Ukraine, Elizabeth Rosenberg sat staring at a computer in the bowels of the Treasury Department, urgently typing away.
As the top Treasury official for terrorist financing and financial crimes, Rosenberg had spent weeks in an unrelenting relenting cycle of shuttling between secure rooms at the Treasury Building, hustling a few hundred yards away to attend meetings at the White House or jetting off on trips to hammer out technical details in European capitals.
Now, after days of subsisting primarily on Kirkland granola bars, she was drafting a classified memo laying out final decision points and considerations for Treasury Secretary Janet Yellen to take to a National Security Council meeting just a few hours away. As Rosenberg went through her edits to the document, a close aide looked over her shoulder, eating a bag of Cheetos.
Soon, a briefer walked directly toward Rosenberg with a sobering message: the first Russian missile had entered Ukrainian airspace. A short time later, the briefer returned. Now there were more than 30 strikes recorded, displayed on a heat map for Rosenberg to see. Soon, the briefer returned a third time. There were now too many missiles to count.
“Zero day,” as US officials had labeled the day of the Russian launch in their months of preparation, had arrived.
Rosenberg rushed to put the final touches on the memo that would serve as the basis of what would become the most expansive sanctions package ever to target an economy of Russia’s size. After months of arduous planning, overseas diplomatic negotiations and countless hours of technical discussions, the time had come to launch.
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