The Biden administration is weighing sweeping sanctions against Russia if it invades Ukraine that could cripple Russia’s access to bond markets, throttle major commercial banks and target powerful oligarchs, an approach that would put Washington in uncharted waters in its confrontation with Moscow, current and former administration officials said Wednesday.
President Joe Biden is betting that the threat of unprecedented sanctions will persuade Russian President Vladimir Putin to pull back from the brink, but it is not clear how far the White House will be willing to go to punish Moscow and whether it would be enough to change Russia’s calculus.
With Biden facing a new test as commander-in-chief just months after the chaotic U.S. withdrawal from Afghanistan, White House officials said the mood is “focused” as they consult with NATO allies and provide regular updates to the president. The crisis has steadily intensified over the past two months as Russia has built up a formidable military presence on Ukraine’s border, with more than 90,000 combat troops on the ground.
Biden said Wednesday that a unilateral U.S. military response was “not in the cards” if Russia attacked Ukraine, making it clear that economic pressure remains the primary tool for Washington and its European allies. Previous U.S. sanctions on Russia have been relatively constrained compared to hard-hitting measures that have been slapped on Iran or Venezuela, countries with smaller economies with fewer ties to global markets. But this time, the Biden administration says, the gloves will be off.
Biden told reporters Wednesday that he told Putin that “there will be severe consequences” if Russia moves on Ukraine — “economic consequences like none he has ever seen.”
Current and former officials say the possible measures include blocking Russia’s access to bond markets in New York; sanctioning major Russian commercial banks, possibly including the massive VTB bank, which is majority-owned by the Russian government; undercutting Russia’s ability to convert rubles into dollars or other foreign currencies; targeting oligarchs linked to Putin with financial and travel restrictions; and even cutting off Moscow’s access to the SWIFT international bank messaging system.
Knocking Russia off the SWIFT system would be a drastic step that could have damaging consequences for European and U.S. businesses, former officials say.
As administration officials calibrate their response, they are considering both worst-case scenarios and the possibility that Putin has already achieved what he set out for: disruption for disruption’s sake.
Putin is a keen observer of his counterparts’ domestic politics, and his provocative actions come as Germany is undergoing its first transition of power in 16 years with the end of Angela Merkel’s chancellorship, while French President Emanuel Macron gears up his own re-election campaign and Biden faces political headwinds at home.
In Congress, lawmakers from both sides of the aisle expressed outrage at Russia’s troop buildup and endorsed the administration’s threat to introduce broad and punishing financial sanctions.
“This isn’t your run-of-the-mill sanctions,” said Sen. James Risch of Idaho, the ranking Republican on the Foreign Relations Committee. “This is going to be a big deal if they make that invasion, and it’s going to involve sovereign debt, it’s going to involve the SWIFT banking system, it’s going to involve the international banking system.”
Biden has come under sharp criticism for having suspended sanctions this year on Russia’s Nord Stream 2 natural gas pipeline under the Baltic Sea, a project strongly opposed by Ukraine and other Eastern European countries. But U.S. officials say the administration will not hesitate to impose sanctions and prevent the completion of the pipeline if necessary.
If Russia launches an offensive, “our expectation is that the pipeline will be suspended,” Victoria Nuland, the undersecretary of state for political affairs, said Tuesday at a Senate hearing.
Senior State Department officials traveling with Secretary of State Antony Blinken at a NATO meeting in Latvia last week said Germany and other European countries were in lockstep with Washington about holding up final approval for the pipeline, even if it caused economic pain for the continent, which relies heavily on Russian gas supplies.
Sanctions against Russia’s broader energy industry would be unlikely, because they could boomerang and trigger even higher gas prices in Europe and the U.S., former officials said.
Given Russia’s myriad links to the global economy, tough sanctions would inevitably have knock-on effects on multinational corporations, stock markets and European economies, in particular. But U.S. officials said that they are determined to send a message of resolve to Moscow and that Biden made it clear in his two-hour video call with Putin that the U.S. would not abide by Russian aggression.
Two White House officials said Biden told Putin: “One nation can’t force another nation to change its border, one nation cannot tell another to change its politics, and nations can’t tell others who they can work with.”
Previous attempts at sanctions have had limited effects on Russia’s actions, and experts disagree about to what degree the threat of sanctions shapes Putin’s decision-making.
Sanctions that were imposed after Russia seized Ukraine’s Crimean Peninsula in 2014 did not push Moscow to retreat, although an array of measures over the past decade have held back Russian economic growth by several percentage points, said Brian O’Toole of the Atlantic Council think tank, who worked on sanctions policy at the Treasury Department during the Obama administration.
The prospect of tougher sanctions, however, helped persuade Putin to agree to a cease-fire in eastern Ukraine and enter into negotiations, O’Toole said.
Apart from sanctions, the Biden administration is looking at providing more weapons and military assistance to Ukraine and trying to revive a stalled peace process for the conflict in eastern Ukraine, which pits Russian-backed separatists against the Ukrainian government.
Some members of Congress have appealed to the White House to move faster to deliver military aid to Ukraine, two lawmakers said, and a bipartisan congressional delegation is due to travel to the country this week.
The delegation is expected to confer with Ukrainian officials, as well as U.S. military officers overseeing training for Ukrainian troops. The Florida National Guard’s 53rd Infantry Brigade Combat Team deployed a week ago to take over training efforts, which date to 2015. A U.S. special operations contingent also oversees training and exercises with Ukrainian forces.
The U.S. troops are barred from taking part in combat.
Current and former officials also said the administration is exploring how to breathe life into the Minsk peace process, which France and Germany have mediated since Russia’s invasion in 2014. One option would have the U.S. join the peace talks.
Michael McFaul, a former U.S. ambassador to Russia, made the case last week for the U.S. to get more involved in the peace process, arguing that it would help counter Russian propaganda that Ukraine is gunning for a war and head off an attempt by Moscow to shut Ukraine out of any diplomatic settlement.
But any diplomatic effort is hampered by the lack of a U.S. ambassador in Kyiv. The Biden administration has yet to submit a nominee for the post.
As the White House prepared for more discussions with NATO allies and the Ukrainian government, it remained unclear what Russia had planned. There was no sign of an imminent invasion, despite the massing of troops, a U.S. intelligence official said.
CIA Director William Burns, a former ambassador to Russia, said at a Wall Street Journal event Monday that “we don’t know that Putin has made up his mind to use force.”
He added: “But what we do know is that he’s putting the Russian military and the Russian security services in a place where they could act in a pretty sweeping way.”