Ukrainian President Volodymyr Zelensky ordered the mobilization of reservists as Russian troops poured into Ukraine’s eastern Donbas region and Western nations announced measures to punish Moscow for recognizing two Russian-controlled statelets there as independent, signaling the potential rising economic price on Russia for further aggression.
Mr. Zelensky, in a televised address, said Russia’s threat to Ukraine’s sovereignty is forcing him to recall contract military personnel to active duty and to mobilize members of the newly created territorial defense brigades for exercises. He said Ukraine wouldn’t carry out a general mobilization of civilians, urging them to continue normal life.
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.
Russian President Vladimir Putin, left, meets with Andrey Kostin, president and chairman of the management board at VTB Bank, at the Kremlin in Moscow last November.
Photo:
Mikhail Metzel/Zuma Press
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.
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“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.
An oil tanker operated by Sovcomflot is moored at the Primorsk Commercial Seaport, the end point of the Baltic Pipeline System, three years ago.
Photo:
Alexander Ryumin/Zuma Press
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.
Write to Ian Talley at ian.talley@wsj.com and Brett Forrest at brett.forrest@wsj.com
WASHINGTON—The U.S. is prepared to impose sanctions and export controls on critical sectors of the Russian economy if Russian President Vladimir Putin invades Ukraine, and is working to mitigate market shocks if Russia withholds energy supplies in retaliation, officials said.
Taking a page out of the Trump administration playbook to pressure Chinese telecom giant Huawei Technologies Co., senior administration officials on Tuesday described potentially banning the export to Russia of various products that use microelectronics based on U.S. equipment, software or technology.
While the officials didn’t specify the products, they said that the goal would be to hit critical Russian industrial sectors that President Putin has given priority to, such as artificial intelligence and quantum computing.
“The export control options we’re considering alongside our allies and partners would hit Putin’s strategic ambitions to industrialize his economy quite hard, and it would impair areas that are of importance to him,” a senior administration official said.
Administration officials declined to provide many specifics on the kinds of sanctions it would impose, but said the moves would exacerbate the selloff in Russian markets, raise the country’s cost of borrowing and hurt the value of Russia’s currency.
Russia has amassed more than 100,000 troops along Ukraine’s borders, moved tanks and other military gear westward from bases in the east, and deployed troops to neighboring Belarus, which also borders Ukraine. White House officials are preparing for an incursion, and in addition to preparing sanctions, the U.S. said it would bolster NATO forces in Eastern Europe.
President Biden said at a news conference 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 (Video from 1/19/22)
After weeks of calls and meetings in European capitals, U.S. and European officials said Tuesday they were seeing “convergence” on prospective sanctions among the U.S. and European nations, in part due to assurances the U.S. is working to secure energy supplies should Mr. Putin invade Ukraine. U.S. officials said they are looking for energy stockpiles in North Africa, the Middle East, Asia and inside the U.S.
“If Russia decides to weaponize its supply of natural gas or crude oil, it wouldn’t be without consequences to the Russian economy,” one of the U.S. officials said. “This is a one-dimensional economy, and that means it needs oil and gas revenue at least as much as Europe needs its energy supply.”
European officials said the Biden administration’s hands-on approach in consulting them and keeping them informed of U.S. plans, including the personal outreach by Mr. Biden and his top officials, has spurred cooperation.
Still, Russia’s ability to mitigate the impact of Western sanctions is significant—far higher than the likes of Iran, whose economy plummeted into a deep slump in 2018 after the Trump administration reimposed nuclear sanctions.
The Bank of Russia puts the country’s reserves at around $630 billion at the end of 2021 and Europe is dependent on Russia for almost 40% of its gas supplies, an export stream sanctions are unlikely to cut off. Russia’s trade and political links with China also make it less vulnerable to being isolated from the world economy.
The U.S. announcement came a day after President Biden discussed the Ukraine crisis with several European leaders. The leaders, including British Prime Minister Boris Johnson, French President Emmanuel Macron and German Chancellor Olaf Scholz, discussed their coordination of sanctions measures and the situation in Ukraine.
The leaders agreed that no major sanctions options should be taken off the table, a European Union official said, even if some would likely be used only as a last resort. Those might include measures that could cause collateral economic harm to Western countries, like cutting Russia out of the SWIFT financial network that enables banks to settle transactions across the world, and embargoes on energy imports from Russia.
“The leaders agreed that, should a further Russian incursion into Ukraine happen, allies must enact swift retributive responses including an unprecedented package of sanctions,” Mr. Johnson’s office said in a statement after the call. “They resolved to continue coordinating closely on any such response.”
The export controls under consideration, the officials said, would be implemented through a powerful U.S. policy tool known as the Foreign Direct Product Rule, which the Trump administration used to cripple China’s Huawei.
Using the rule to target a country or multiple industrial sectors as opposed to a single company is a novel strategy that could potentially have wide-ranging effects given the global dominance and ubiquity of U.S. chip-making tools and software. For example, the U.S. could use the rule to block a foreign company that made a phone in a different foreign country from selling that item to Russia if the device uses any U.S. chips.
The impact of the rule would depend on how broadly officials decide to apply the restrictions and on the precise wording in any regulation. The Trump administration made multiple attempts before settling on language for a regulation that ultimately exacted a meaningful impact on Huawei.
—Catherine Lucey contributed to this article.
Write to Gordon Lubold at Gordon.Lubold@wsj.com, Kate O’Keeffe at kathryn.okeeffe@wsj.com and Laurence Norman at laurence.norman@wsj.com
Iran rejected a European Union offer to arrange direct nuclear talks with the U.S., senior diplomats say, risking fresh tension between Tehran and Western capitals.
Two senior Western diplomats said Iran has ruled out attending a meeting in Europe for now, saying it wanted a guarantee first that the U.S. would lift some sanctions after the meeting.
The U.S. had said it would attend the talks, which the EU had hoped to host in the coming days. However, Washington had refused to provide sanctions relief before face-to-face negotiations with Iran had taken place.
Diplomats said Iran’s rejection didn’t kill off all hopes of direct negotiations in coming months and that Tehran’s move might be an attempt to gain leverage in future talks. Those talks could yet start before the Iranian new year in late March.
Still, Iran’s move is likely to exacerbate tensions in the coming days.
A State Department spokesman didn’t respond to a request for comment.
At stake are efforts by the EU to revive the 2015 nuclear deal from which the Trump administration withdrew and whose limits Iran has subsequently breached. Both the Biden administration and Iran say they want to restore the accord, but the two sides have been stymied by a debate on which should move first.
As that dispute has festered, France, the U.K. and Germany are working on a resolution they plan to present to the board of the International Atomic Energy Agency next week that would censure Iran for its recent steps to expand its nuclear activities and its failure to cooperate with the agency’s probe into its nuclear work.
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Iran has warned if the censure move goes ahead it might end an agreement it struck earlier this month with the IAEA that would allow most international inspections to continue. Iran had previously said it would significantly curtail inspectors’ access to its nuclear activities, but it scaled back that move after IAEA Director General
Rafael Grossi
visited Tehran.
If Iran follows through on that threat, it would greatly reduce international oversight of Iran’s nuclear work, a situation that Mr. Grossi has said would gut the agency’s ability to keep Iran’s nuclear program in check.
The Biden administration has said it wants to return to the nuclear deal but won’t suspend its sanctions on Iran until Tehran reverses the multiple steps it has taken to breach the 2015 nuclear deal.
European diplomats had warned that if Iran stayed away from the talks, which the EU hoped to arrange for this coming week, it could leave Tehran more isolated diplomatically. One senior European diplomat said that Iran was however fearful of going home empty-handed from a meeting with the U.S., which could have sparked a major backlash in Iran.
Write to Laurence Norman at laurence.norman@wsj.com and Michael R. Gordon at michael.gordon@wsj.com
BRUSSELS—The European Union will impose fresh sanctions on Russian officials over the jailing of opposition leader Alexei Navalny and will move ahead with measures to challenge Beijing over its crackdown in Hong Kong, signaling a shift in the bloc’s position on the two countries toward the U.S.’s.
EU foreign policy chief Josep Borrell said Monday evening he will propose a list of Russian officials to be hit with asset freezes and travel bans over the Navalny case. Speaking after a meeting of EU foreign ministers, he said he hopes the list will be approved within a week.
The sanctions will target “those responsible for his arrest, sentencing and persecution,” Mr. Borrell said in a press conference. Two diplomats said they expected the EU to sanction around half a dozen people.
It will be the first use of the EU’s new human-rights sanctions framework, similar to the U.S. Magnitsky Act.
The EU decision came as foreign ministers held a two-hour videoconference with U.S. Secretary of State Antony Blinken. Discussions touched on a range of subjects from the Biden administration’s goal of working with European allies on challenges from Russia and China to the Iranian nuclear deal.
