The Biden administration is evaluating the impact of new sanctions on Russia and is ready to escalate those penalties if the Kremlin fails hack attacks and attempts to disrupt the US political process, according to people familiar with the case.
Options available to President Joe Biden include extending measures announced Thursday to bar U.S. financial institutions from the secondary market for ruble-denominated bonds issued by Russian state-owned banks, the people who discussed the matter said on the condition of anonymity.
Biden ordered the latest sanctions against Russia – including limits on buying newly issued sovereign debt – in response to allegations that Moscow was behind a hack. SolarWinds Corp. and interfered in last year’s US election.
The US has also imposed sanctions on a number of entities and individuals, while 10 Russian diplomats working in Washington were deported, including some intelligence officers.
Still, the measures were calibrated by the US to punish the Kremlin for past crimes while at the same time preventing relations from deteriorating further, especially as tensions over a Russian military build-up near Ukraine are mounting.
In another sign of deteriorating relations between the two countries, Russia on Saturday accused a Ukrainian diplomat of stealing information and gave him three days to leave the country on Saturday, Interfax news agency reported. Ukraine hinted it would respond in kind.
Two days before announcing the sanctions, Biden offered to meet with Russian President Vladimir Putin later this year, even as he warned his counterpart of a litany of violations.
The White House communications officers did not immediately comment.
For now, US officials are waiting to see how Putin responds. On Friday, Russia expelled 10 US diplomats and imposed sanctions on eight officials in tit-for-tat movements who no longer responded to US restrictions on its government debt.
Secretary of State Sergei Lavrov told reporters in Moscow that Russia could take measures that harm the interests of US companies, but will keep them in reserve for the time being.
Market impact
The Biden government is also looking to global markets to see the impact of its latest measures, including on the ruble, and any shifts in foreign ownership of Russian ruble bonds, the people said. Interest rate decisions by the Russian central bank and capital flows will also provide important clues, they said.
The Bank of Russia’s next interest rate decision is scheduled for April 23.
Under the sanctions unveiled Thursday, the Biden administration will ban US financial institutions from participating in the primary market for new debt issued by the Russian central bank, the Treasury Department and the sovereign wealth fund. Those limits take effect on June 14.
Russian bonds fell and the ruble fell the most since December on news of the impending fines, but recovered their losses on Friday, when investors concluded the measures were more lenient than feared.
White House officials sought to limit the impact of the sanctions on the US and the global financial system while protecting Russia’s civilian population from unnecessary damage, the people said. The Biden team now hopes to ease tensions and believes this would benefit financial markets and the Russian economy, one said.
Still, US officials are holding other potential escalations in reserve, including measures aimed at preventing trading of ruble debt in the secondary market for the first 90 days or more after issuance, the person said.
– With the help of Aine Quinn
Updates with Russia expelling the Ukrainian diplomat in the fifth paragraph.