Will Biden’s sanctions stop a Russian invasion of Ukraine?

WASHINGTON — When the Obama administration imposed sanctions on Russia for invading Ukraine in 2014, U.S. officials hoped they would dissuade President Vladimir V. Putin from continuing the aggression.

Some of the officials now say the sanctions prevented Mr Putin from ordering Russian forces to move beyond where they left off on the Crimean peninsula and the eastern region of Donbass. But Mr. Putin clung to Crimea. And on Monday he ordered more troops into an insurgent-held area of ​​eastern Ukraine where thousands of Russian troops were operating and said the Kremlin recognized the enclaves as independent states.

Now President Biden, who as vice president helped oversee Ukraine policy in 2014, must weigh what sanctions could force Mr Putin to end his new offensive, which the White House judged be an “invasion”. The White House is taking a step-by-step approach, trying to calibrate each tranche of measures to Mr. Putin’s actions.

“I will begin to impose sanctions in response, far beyond the measures that we and our allies and partners implemented in 2014,” Biden said Tuesday, announcing a new set of penalties. “And if Russia goes further with this invasion, we are ready to go further.”

While US officials have studied the effects of sanctions imposed since 2014 and refined the techniques, Mr Putin has had years to make his country’s $1.5 trillion economy more insular so parts of Russia be protected from severe penalties. Speaking to reporters on Friday, he boasted that his country had become more self-sufficient in the face of “illegitimate” Western sanctions, according to Russian news service Tass. He added that in the future it would be “important for us to raise the level of our economic sovereignty”.

And perhaps most notably, Mr. Putin and his closest aides and partners in Moscow may not suffer much from the sanctions themselves, analysts say.

Putin’s decision on Monday to continue the troop movement suggests he has concluded the costs of new sanctions are tolerable, despite US talk of “massive consequences” for his country. Several of his top aides made the point in choreographed speeches at a Monday meeting of his Security Council in Moscow.

If Russian officials are firm on this mindset, the Biden administration may find that it needs to impose the absolute harshest sanctions — ones that would inflict suffering on many ordinary citizens — or seek a non-economic option, such as give more military aid to an insurgency in Ukraine. Mr Biden has said he will not send US troops to defend Ukraine.

Some of the hard-line nationalist men around Mr Putin were already on a Treasury Department sanctions list and accept that they and their families will no longer have any substantial ties to the United States or Europe for the rest of their lives, said Alexander GabouevChairman of the Russia in Asia-Pacific Program at the Carnegie Moscow Center.

“These are the powerful people of today’s Russia,” he said. “There is a lot of chic wealth. They are totally isolated. They are the kings, and this can only be ensured in Russia.

Moreover, because of their roles in state-owned enterprises and their business ties, they are “the very people who directly benefit from the economy becoming more isolated, more detached from the outside world”, he added. .

They have also adopted a siege mentality rooted in an ideological belief about the United States and its sanctions policies that Mr. Putin regularly pushes. “He says, ‘It’s not because of the actions I take, but it’s because we’re rising as a power, and the Americans want to punish us for resisting hegemony,'” he said. Mr. Gabuev. “I think it’s genuine. Most of my government contacts believe so.

Sanctions announced by the United States on Tuesday include sanctions against three sons of senior officials close to Mr Putin and two state-owned banks, as well as new restrictions on Russia’s ability to generate revenue by issuing sovereign debt. The costs aren’t expected to be felt widely in Russia — both banks are political institutions and have no retail operations — but U.S. officials could eventually announce more painful measures.

The announcement follows an executive order issued by Mr. Biden on Monday evening that prohibits business relationships between Americans and entities in the Russian-backed eastern enclaves in Ukraine. The Biden administration would also have the power to impose sanctions on anyone operating in those areas, a US official said.

Britain announced on Tuesday that it was freezing the assets of five Russian banks and imposing sanctions on three Russian billionaires and some MPs. And Germany said it was suspending certification of the Nord Stream 2 gas pipeline that would connect to Russia.

White House, State Department and Treasury Department officials have spent weeks coordinating a response with European leaders and major financial institutions and say they are capable of acting almost immediately as Russia steps up its actions. .

Some experts say that if the Biden administration follows through on the tougher options suggested by officials — including separating the country’s major banks, including Sberbank and VTB, from dealings with non-Russian entities — Russia could suffer a panic. financial crisis that triggers a stock market crash and rapid inflation. The effects would most likely hit not only billionaire oligarchs, but also middle-class and low-income families. Russian companies would also not be able to receive payment for energy exports.

In addition to isolating Russia’s state-owned banks, the progressive sanctions that US officials have prepared would also prevent the purchase of critical technologies from US companies.

If the United States imposes the harshest penalties, “there will be unintended and unpredictable consequences for global markets,” said Maria Snegovaya, a visiting scholar at George Washington University who co-wrote a Atlantic Council Document on US sanctions against Russia.

Edward Fishman, a senior State Department sanctions official in the Obama administration, called Biden’s action on Tuesday a modest first step intended for “a butt kick.”

Mr Fishman said the administration’s decision against one of the two targeted banks – VEB, the country’s main development bank – was the first time the United States had completely cut off a Russian financial institution owned by the State. “I take this as a warning that the Biden administration is prepared to cut other major Russian banks from the US financial system,” Fishman said.

“Biden is giving Putin an opportunity to walk away from the abyss,” he added. “But it also signals that if Putin launches a full-scale war, the economic costs will be immense.”

A severe economic disruption could test Mr. Putin’s control over his country. But many analysts doubt that the United States and its European allies will follow through on the tougher options they have considered, as they may be discouraged by fears of collateral damage to their own economies.

And no Western official has even offered to stifle the engine of the Russian economy by cutting its lucrative energy exports. Experts say action against Russian energy revenues would have the biggest impact, but it would also lead to a precarious political situation for Mr Biden and other world leaders as oil and gas prices rise in a period of high global inflation.

The Russian government has spent years trying to reconfigure its budget and finances so it can withstand further sanctions, efforts that have been aided by high market prices for oil and gas. It has relatively low debt and is less dependent on loans from foreign entities than before 2014. More importantly, the central bank has accumulated foreign exchange reserves of $631 billion, the fourth such reserve in the world.

Some important Russian state enterprises and private companies have actually benefited from US sanctions. Kremlin policies to replace Western imports with Russian and non-Western products end up increasing the profits of these companies. And some of Mr. Putin’s allies and their families have done well in the initiatives. One example is Dmitry Patrushev, the minister of agriculture, whose family has become richer thanks to new policies in the agricultural industry, Gabuev said.

Chinese President Xi Jinping, who has strengthened his country’s ties with Russia, could help Mr Putin circumvent some of the sanctions or bolster Russia’s economy with larger energy purchases. When the two leaders met in Beijing at the start of the Winter Olympics, their governments announced a 30-year deal in which China would buy gas through a new pipeline through Siberia. Chinese companies may also be able to fill some of the supply chain gaps created by the halt to some US technology exports to Russia, although these companies may not be able to replicate more advanced US products. .

Chinese leaders would likely be careful that their major state-owned banks continue to openly do business with Russian banks under US sanctions, but China has ways of hiding some transactions.

“They have developed many electronic and digital payment solutions,” said Daniel Russell, former Assistant Secretary of State for East Asian and Pacific Affairs and executive of the Asia Society. “There are all sorts of pretty sophisticated barter systems that they use. Third, they can hide behind a lot of black market stuff.

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