The United States will impose sanctions on two Russian financial institutions and further restrictions on the country’s sovereign debt in response to Moscow’s recognition of Ukraine’s breakaway regions and the deployment of Russian troops to the area, U.S. officials announced on Tuesday.
The move comes as Russian President Vladimir Putin announced on Monday in an hourlong address to the nation, laced with conspiracy theories and falsehoods, that he was moving to recognize the independence of the so-called Donetsk and Luhansk People’s Republics and would deploy further Russian troops to the region.
“He’s setting up a rationale to take more territory by force, in my view,” U.S. President Joe Biden said, speaking of Putin’s decision. “This is the beginning of a Russian invasion of Ukraine,” he said, echoing other world leaders who have cautioned that Putin may continue to escalate in the days ahead.
The United States will impose sanctions on two Russian financial institutions and further restrictions on the country’s sovereign debt in response to Moscow’s recognition of Ukraine’s breakaway regions and the deployment of Russian troops to the area, U.S. officials announced on Tuesday.
The move comes as Russian President Vladimir Putin announced on Monday in an hourlong address to the nation, laced with conspiracy theories and falsehoods, that he was moving to recognize the independence of the so-called Donetsk and Luhansk People’s Republics and would deploy further Russian troops to the region.
“He’s setting up a rationale to take more territory by force, in my view,” U.S. President Joe Biden said, speaking of Putin’s decision. “This is the beginning of a Russian invasion of Ukraine,” he said, echoing other world leaders who have cautioned that Putin may continue to escalate in the days ahead.
On Tuesday, Defense Secretary Lloyd Austin ordered 800 U.S. troops to be redeployed from Italy to the Baltic region and eight F-35 fighter jets to NATO’s eastern flank, while dozens of attack helicopters are being deployed to Poland and the Baltic from elsewhere in Europe.
Under the new U.S. sanctions, Russia’s state development corporation Vnesheconombank as well as the state-owned Promsvyazbank, which is closely linked with the Russian defense industry, will be subject to full blocking sanctions. This move cuts them off from the U.S. dollar entirely and freezes any assets they hold in the United States. “It’s the gold standard of financial sanctions,” said Daniel Fried, a retired career diplomat who spearheaded the U.S. sanctions response in 2014 when Russia annexed Ukraine’s Crimean peninsula and deployed troops to the Donbass.
Still, the impact of today’s announcements is likely to be limited. Of the five Russian officials sanctioned individually—the director of the Russian security services, Alexander Bortnikov; First Deputy Chief of Staff of the Presidential Executive Office Sergei Kiriyenko; and the two men’s sons, who hold prominent positions in the Russian corporate world, as well as the CEO of Promsvyazbank, Petr Fradkov—Bortnikov, Kiriyenko, and Fradkov have all previously been subject to U.S. sanctions. A fact sheet issued by the White House said that other members of the Russian elite and their relatives had been put on notice that additional steps could be taken against them.
Sanctions on Russian sovereign debt will extend to prohibiting secondary trade on new bonds issued after March 1, further limiting Russia’s ability to raise funds on the global market. Previous U.S. sanctions had been confined to the primary sale of Russian government debt.
Biden’s announcement comes as other governments and the European Union have been putting their sanctions in place in response to Russia’s renewed aggression toward Ukraine. Officials in the United States and Europe have been weighing how to forcefully respond to Putin’s opening gambit in Ukraine, while holding more severe penalties in reserve in a bid to deter Russia from taking further action. A senior administration official, speaking on background on terms set by the White House, said “no Russian financial institution is safe” in the event of a further Russian escalation, adding that the United States is willing to target Russia’s two largest banks, Sberbank and VTB Bank.
Germany, which initially appeared slow to grasp the scale of the Russian threat to Ukraine, announced on Tuesday that it is to suspend the Nord Stream 2 pipeline, which was set to double deliveries of Russian natural gas to the country. Officials in Kyiv have long lobbied for halting the pipeline, which would enable Russia to bypass Ukraine altogether in transporting gas to Europe. Ukraine sees the project as an existential threat that could deprive the country of billions of dollars in transit revenues and remove any incentive for Russia not to attack Ukraine further.
“This demonstrates that Germany stands in solidarity with Ukraine,” said Yuriy Vitrenko, the head of Ukraine’s state energy company, in a statement.
The United States has long been opposed to the project, but the Biden administration held off imposing sanctions on Nord Stream 2’s parent company out of concerns that it would tarnish Washington’s relationship with Berlin.
A meeting of European Union foreign ministers in Paris agreed unanimously on a new package of sanctions targeting individuals and companies involved in Russia’s decision to recognize Ukraine’s separatist regions, as well as banks that finance the Russian military. The bloc will also ban trade with the so-called Donetsk and Luhansk People’s Republics.
Britain’s Prime Minister Boris Johnson announced sanctions against five Russian banks, including Bank Rossiya, which the U.S. Treasury has described as “the personal bank for senior officials of the Russian Federation,” as well as Promsvyazbank. The United Kingdom also singled out for sanctions three oligarchs: Gennady Timchenko, who is close to the Russian president, as well as the billionaire brothers Boris and Igor Rotenberg.
Experts question the impact that the British sanctions would have, while politicians in Johnson’s own Conservative Party as well as members of the opposition called on London to take more forceful action. The three men and Bank Rossiya are already subject to U.S. sanctions, making it unlikely that any British financial institutions would have dealt with them anyway due to the sanctions risk.
“As a practical matter, there wouldn’t seem to be much of an effect,” said Brian O’Toole, a former U.S. Treasury sanctions official.
A spokesperson for the U.K. government said, “These sanctions are targeted at the people and financial institutions who have underwritten Putin’s campaign to violate Ukraine’s sovereignty.” The spokesperson added, “As the Prime Minister has said, this is just the beginning. This is our first tranche of sanctions, which will hit oligarchs and banks close to the Kremlin, with more to follow should Russian aggression continue.”
Japan’s prime minister also said Monday it was prepared to join the United States, the U.K., and other G-7 countries in imposing sanctions against the group’s former member, Russia, whose place in the grouping was revoked after its annexation of Crimea in 2014.
In the immediate aftermath of Putin’s announcement, U.S. officials appeared to struggle with whether or not to characterize the move as an invasion. On a call with reporters on Monday evening, another senior administration official, speaking on background on terms set by the White House, declined to answer whether the administration considered the move an invasion.
Sanctions experts who have previously served in government said that they were surprised that the administration did not have a more immediate response on whether the move constituted an invasion, given that recognition of Ukraine’s breakaway republics and the deployment of so-called peacekeepers had long been regarded as a likely scenario Moscow could pursue to escalate the situation. Russia has used similar tactics in Georgia and Moldova.
“There’s always a big gap between preparing in principle and game time,” Fried said.
However, by Tuesday morning, the administration described the move as the start of an invasion. “Make no mistake: Yesterday’s actions are the beginning of the latest Russian invasion of Ukraine,” said Deputy Secretary of State Wendy Sherman, speaking to a meeting of the Organization for Security and Co-Operation in Europe.
Shortly after Putin’s announcement, Biden signed an executive order banning trade and prohibiting any new U.S. investment in the so-called Donetsk and Luhansk People’s Republics recognized by Russia. The order included a carve-out to continue to allow for humanitarian aid to be delivered to the region.
Fried described the collective response of the United States and its allies as “solid work.” But others felt that Washington could have gone further.
Biden’s first round of sanctions are “not very impressive,” said Aurel Braun, a fellow at Harvard University’s Davis Center for Russian and Eurasian Studies. Putin looks for easy targets, he said, and Ukraine needs to be given more economic and psychological assistance to convince the Russian president that any more aggression would mean definite, serious losses for the Russian army. After all, Putin doesn’t want to see thousands of body bags, Braun said.
“Mr. Biden has opened up a little bit,” he said. “He should open up a lot more.”
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