Inside the Treasury Department’s economic war on Russia

“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.

Russia is 'hemorrhaging' millionaires

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.

Elizabeth Rosenberg, Assistant Secretary for Terrorist Financing, Department of the Treasury.

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…

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