The Biden administration is assessing the impact of new sanctions on Russia and is willing to increase those sanctions if the Kremlin fails to curb piracy attacks and tries to interfere with the U.S. political process, according to people familiar with the matter. .
Options available to President Joe Biden include expanding measures announced Thursday to ban U.S. financial institutions from the secondary market of ruble-denominated bonds issued by Russian state-owned banks, people said, discussing the issue with the condition of anonymity.
Biden ordered the latest sanctions on Russia, including limits on the purchase of recently issued sovereign debt, in response to allegations that Moscow was behind an attack. SolarWinds Corp. and interfered in last year’s U.S. election.
The United States also sanctioned several entities and individuals, while expelling ten Russian diplomats working in Washington, including some intelligence officers.
Still, the moves were calibrated by the United States to punish the Kremlin for past misdeeds and prevent relations from deteriorating further, especially as tensions escalate over a Russian military buildup near Ukraine.
In another sign of worsening 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 that 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 about a litany of transgressions.
White House communications staff did not comment immediately.
For now, U.S. officials are waiting to see how Putin responds. On Friday, Russia expelled ten U.S. diplomats and imposed sanctions on eight officials in actions that did not respond to U.S. restrictions on its sovereign debt.
Foreign Minister Sergei Lavrov told reporters in Moscow that Russia could take measures that would harm the interests of American companies, but that it will maintain reserves for the time being.
Impact on the market
The Biden administration is also looking at global markets to see the impact of its latest measures, including the ruble, and any changes in foreign ownership of Russian ruble bonds, according to people. Decisions on Russia’s central bank interest rates and capital flows will also provide important clues, they said.
The next decision on the Bank of Russia interest rate is scheduled for April 23.
Under sanctions imposed on Thursday, the Biden administration will ban U.S. financial institutions from participating in the primary market for new debt issued by Russia’s central bank, the finance ministry and the sovereign wealth fund. These limits will take effect on June 14.
Russian bonds fell and the ruble fell more since December on news of imminent sanctions, but they recovered their losses on Friday as investors concluded the measures were lighter than had been feared.
White House officials tried to limit the consequences of sanctions for the United States and the global financial system while saving the Russian civilian population from unnecessary damage, the people said. Biden’s team now hopes to start reducing tensions and believes this would benefit the Russian financial markets and economy, one of the people said.
However, U.S. officials are holding back other possible escalations, including moves aimed at preventing the secondary market from trading in any debt in rubles for the first 90 days or more after the issue, the person said.
– With the assistance of Aine Quinn
(Updates with Russia expelling the Ukrainian diplomat in the fifth paragraph.)