Biden’s Sanctions
Plan Targets Russian Banks, Companies and Imports if Ukraine Is Attacked
The plan, which is
still being finalized, would prohibit a range of activities
By Ian Talley and
Brett Forrest, WSJ, January 28-29
WASHINGTON—The Biden administration is finalizing its
targets for a barrage of economic sanctions against Russia if it attacks
Ukraine—hitting major Russian banks, state companies and key imports, though
the strategy faces obstacles that have hindered previous pressure campaigns.
Administration officials said the planned actions are
unparalleled in recent decades against Russia, putting teeth into President
Biden’s threat to apply punishing financial and other sanctions in the event of
a Russian assault.
President Biden said on Wednesday that the U.S. is ready to
unleash sanctions against Russia if President Vladimir Putin makes a move
against Ukraine. Biden also laid out a possible diplomatic resolution. Photo:
Susan Walsh/Associated Press
While final decisions haven’t been made, the officials said,
the potential targets include several of Russia’s largest government-owned
banks, such as VTB Bank, the banning of all trade in new issues of Russian
sovereign debt and the application of export controls across key sectors such
as advanced microelectronics.
Past U.S. efforts to wage economic warcraft have produced
mixed results. Iran and North Korea, for example, have adjusted over time to
broad economic embargoes over their nuclear-weapons programs, though not without
ongoing pain for their economies and people. After Russia invaded Ukraine in
2014, the Obama administration went after some energy-technology exports,
sovereign debt and some government-owned banks and firms, though the narrow
scope of those sanctions didn’t exact deep damage.
Russia is better prepared now, with deeper foreign-currency
reserves, less reliance on foreign debt, faster economic growth and rising
prices for oil—the country’s primary revenue source. Russia’s role as a top
exporter of oil and gas and its economic integration with Europe have
previously deterred the U.S. from applying broad sanctions out of concern that
they would upset global markets and European allies.
Off the table, for now, are sanctions on oil and natural-gas
exports or disconnecting Russia from SWIFT, the basic infrastructure that
facilitates financial transactions between banks across the world, the U.S.
officials said, but that could change depending on Russian actions.
Still, this time around, the officials said, the U.S. is
doing away with the incremental approach that blunted the impact of the 2014
and other efforts—and instead is moving to prohibit a broader range of
activities from the start.
“We and our allies have a full range of high-impact
sanctions ready to go, both immediately after a Russian invasion and in waves
to follow. Nothing is off the table,” said National Security Council
spokeswoman Emily Horne.
“We would start high and stay high, and maximize the pain to
the Kremlin,” one of the officials said.
European allies are also more in sync with the U.S. than in
2014, the officials said, given that Russian President Vladimir Putin’s demands
go beyond Ukraine this time to include a reworking of post-Cold War security
arrangements in Europe.
Europe understands “that if we’re going to change Putin’s
calculus, we have to be ready together to impose massive consequences,” the
official said. The U.S. and European Union actions won’t be identical, but will
“deliver a severe and immediate blow to Russia and over time make its economy
even more brittle,” the official said.
Russian Foreign Minister Sergei Lavrov said this week that
the sanctions threats are part of the West’s “militaristic frenzy.” Russia, he
said, is “ready for any developments.”
Other than VTB Bank, other large government-owned or
controlled banks under consideration for blacklisting are Gazprombank
and Sberbank, said one of the officials. Sberbank, which accounts for 30% of
net assets in Russia’s financial system, may not get hit in the first round of
sanctions to hold a potent option in reserve, according to former officials.
VTB, Gazprombank and Sberbank
didn’t respond to requests for comment.
The possible blacklisting technically prohibits U.S. banks
and other American entities from doing business with the targeted banks, and
the administration may grant exceptions. But the risk of violators being
punished by the U.S. usually encourages foreign banks to comply.
“Banks in Paris and London aren’t going to be doing what
U.S. banks aren’t doing,” said Brian O’Toole, a former top Treasury sanctions
official in the Obama administration and now a senior fellow at the Atlantic
Council, a nonpartisan Washington think tank.
Government-owned companies are also targets of similar
sanctions, the U.S. officials said. Though the officials didn’t specify which
companies, some financial analysts said blacklisting firms like Russian
insurance giant Sogaz, which insures companies tied
to the Kremlin, and Sovcomflot, a large
energy-shipping company, would hurt the Kremlin and, longer term, the economy.
Sovcomflot’s chief financial
officer, Nikolay Kolesnikov, said his company has no indication it would be
targeted. Given that half his firm’s business is outside the country, a
blacklisting would likely disrupt petroleum exports and hit global tanker
rates, he said.
Sogaz didn’t respond to a request
for comment.
Some former officials and critics of the Biden
administration are skeptical that its approach will work or prove different
from past efforts. Aside from a more robust Russian economy, they said, Mr.
Putin is counting on Germany and other EU leaders to block measures that would
have financial repercussions for Europe.
“Putin has concluded that the Biden administration, which is
full of the same people who mounted a feeble response to his first invasion of
Ukraine back in 2014, would impose pinprick financial costs at best, certainly
measures that he thinks Russia can weather,” said Marshall Billingslea, the
Treasury Department’s sanctions deputy in the Trump administration and now at
the Hudson Institute, a right-leaning think tank.
Previous sanctions haven’t undermined Mr. Putin’s domestic
popularity enough to loosen his grip on power or fundamentally alter his
foreign policies, said some analysts. New sanctions, they said, may bolster Mr.
Putin’s position, affect Western-facing companies and drive Russia further
toward China.
New sanctions will “hit the most pro-Western part of the
business elite and the economically Western-oriented population the most,” said
Mikhail Barabanov, a fellow at the Center for
Analysis of Strategies and Technologies, a private Moscow think tank.
“Politically, it’s not painful. It’s destructive,” Kremlin
spokesman Dmitry Peskov said this week.
Mr. Barabanov predicted that
sanctions would inspire a restructuring of the Russian banking market, which,
after an initial shock, would tap Chinese intermediary banks for financing.
Sanctions “are not a magic bullet,” said Daniel Fried, a
senior State Department official in the Obama administration involved in
sanctions policy who is also currently at the Atlantic Council.
“Even the stronger recommended sanctions won’t cause Putin to reverse course overnight,” he said. On the other hand, governments and analysts “often underestimate what can be achieved in the long run,” he said.