- Biden rolled out new sanctions against Russian entities on Tuesday, retaliating against the country's push into Ukraine.
- The sanctions target two banks and a group of elites, as well as freeze Russia's ability to sell government bonds.
- The government will focus on ensuring the sanctions don't damage the US economy, Biden said.
It's 2014 all over again. Russia is moving troops and equipment into Ukraine, giving the clearest hint yet that it aims to invade the country. And the US is unveiling fresh sanctions in an effort to freeze Russia in its tracks.
President Biden rolled out a "first tranche" of new sanctions against Russian entities on Tuesday, joining European allies in retaliating against Russia's actions. The measures target two large Russian banks, a collection of Russian elites and their families, and Russia's ability to sell its government debt. Monday's events signaled "the beginning of a Russian invasion of Ukraine," and the new sanctions will place new economic pressure on Russia, Biden said in Tuesday remarks.
"That means we've cut off Russia's government from Western financing," the president added. "It can no longer raise money from the West and cannot trade in its new debt on our markets or European markets either."
The president's remarks came one day after Russian President Vladimir Putin decided to recognize two regions of Ukraine as independent states. Putin signed a presidential decree soon after that ordered a "peacekeeping" operation in the regions, moves that US officials have deemed a likely first-act for an all-out invasion. Putin's actions sparked immediate blowback from the European Union, the UK, and the US, as well as pledges to counter Russia's efforts.
The US has also supplied military support to Ukraine and nearby countries, but sanctions are, so far, the country's most aggressive response to Russia's actions.
The measures block new investment and trade for Russian businesses and elites. Bank accounts will be frozen, trade negotiations will stop, and international payments will be banned. While Tuesday's announcement is only Biden's first step at pushing back, it shows the US and its peers targeting two of Russia's biggest industries: finance and energy.
Taking the fight to Russia's banks and Putin's inner circle
VEB and Russia's military bank were sanctioned Tuesday, essentially leaving them unable to do business in the US. The US dominates the global financial sector, and losing access knocks the aforementioned firms' ability to compete on the international playing field.
The sanctions also allow for more targeted punishment against sectors and elites closest to Putin. A list of new sanction targets published by the Treasury Department on Tuesday names Alexander Bortnikov, director of Russia's Federal Security Service and informally known as the country's spy chief, as well as his son, Denis. Deputy presidential chief of staff Sergey Kiriyenko, his son Vladimir, and Promsvyazbank CEO Petr Fradkov were also sanctioned. The measures essentially freeze the elites out of the US economy and financial markets, as well as block international payments sent to them from the US.
"They share in the corrupt games of the Kremlin policies and should share in the pain as well," Biden said, adding Russia "will pay an even steeper price if it continues its aggression."
Harsher sanctions were likely held back to give the US some flexibility and deter Russia from pushing further into Ukraine, deputy national security advisor Jon Finer told MSNBC on Tuesday. Separately, a senior administration official told reporters the US could still take action against larger Russian banks like Sberbank and VTB, according to Axios. The two collectively hold nearly $750 billion, or more than half of Russia's total wealth.
The new sanctions are already hitting the country's investors. The MOEX index — Russia's main stock market gauge — plunged more than 9% on Monday and rose 1.6% on Tuesday as sanction risks powered frenetic trading. The sessions marked the most volatile two days of trading since Russian forces seized Crimea in 2014.
Economists are also forecasting broad damage to the Russian economy. The measures already announced could cut 1% from Russia's economic output, Capital Economics said Tuesday. Harsher measures could wipe as much as 5% from the country's gross domestic product and place it at risk of a recession, the analysts added.
Russian energy is in the crosshairs, but sanctions raise new risks
One of the strongest retaliatory moves came from Germany on Tuesday. Chancellor Olaf Scholz announced the country would halt certification of the Nord Stream 2 pipeline project that, once approved, would move natural gas from Russia to Germany. The infrastructure serves as a key energy source for Europe and a crucial pipeline for Russia to export the commodity. While NS2 has already been completed, it still requires approval from German authorities to operate.
Rosneft, Russia's biggest oil company, is already feeling the heat. Its shares plummeted almost 8% in Tuesday trading.
The impact of targeting Russian energy, however, will likely spill over into other countries. Europe is still struggling through an energy shortage that began in the fall of 2021. Though NS2 wasn't yet operating, cutting the project off erases a key lifeline for European consumers hit with soaring energy prices.
The US government will have to focus on making sure its new sanctions hit the Russian economy and not everyday Americans, Biden said Tuesday. Gasoline has been one of the biggest drivers of US inflation, and the national average price per gallon currently sits at 8-year highs.
Coordination with gas producers and close monitoring of energy supplies will be needed to stave off self-inflicted price growth, Biden said.
"Defending freedom will have costs, for us as well, and here at home," Biden said. "I want to limit the pain the American people are feeling at the gas pump."