The Biden administration has threatened to impose devastating sanctions against Russia if it attacks Ukraine, though the strategy could face obstacles and deleterious consequences, experts warn.
Alongside export controls on advanced microelectronic technologies, the United States is now eyeing Russia’s major banks as part of a slate of punishing financial sanctions if Moscow orders the 120,000 troops massed outside Ukraine across the country’s border.
President Joe Biden has also said he would consider sanctioning Russian President Vladimir Putin personally — an action against a head of state that the U.S. takes rarely.
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But finding consensus among Western allies has proven challenging, and how effective any measures might prove remains unclear. Biden has also faced criticism for not taking action preemptively.
SberBank, which holds some 30% of total Russian banking assets, is one of several larger government-owned or controlled banks under consideration for blacklisting by the U.S., along with VTB Bank and Gazprombank, according to a Wall Street Journal report Friday.
Such action would prohibit U.S. financial institutions from doing business with the targeted firms.
“Where there’s a little danger is that you do something that creates instability inside Russia to such a degree that the Russians then decide they want to widen the conflict,” a national security council official during the Obama administration said. “They think we’re waging war against them, just not with the military.”
Targeting banks has shown success before, with some crediting the sanctions imposed by the U.S. on Iran in the years leading up to the 2015 nuclear deal with helping bring its leaders to the negotiating table.
But “you want to have your allies with you,” said a congressional aide, noting that NATO faces a “solidarity problem,” with Germany just one of several European countries “trying to poke holes” in U.S. sanctions.
Officials have warned that the administration will adopt a “start high, stay high” posture, insisting that Russia would face severe consequences for an attack on Ukraine, but failing to bring other countries on board could lead to workarounds that lessen the financial and narrative power of any sanctions.
“What Putin is banking on is total disarray in the West — that Western countries won’t be able to agree on a tough sanctions program for Russia,” said Bill Browder, a London-based investor who has led a campaign against the Kremlin’s reach since the killing of his lawyer Sergei Magnitsky.
Browder has urged individual sanctions as one potential option, telling the Washington Examiner that the administration could act immediately using deterrent actions.
“Let’s say you start with five people before they ever invade just to show that you’re serious,” Browder said. “If they don’t move back the troops at the border, you do another five. Then if they do cross the border, you do another 40.”
“The U.S. did this beautifully in 2018 after the hacking of the elections. They sanctioned seven oligarchs, and that was like a neutron bomb going off over Moscow,” he added.
Biden has said individual sanctions remain an option, telling a reporter, “Yes,” in answer to a question Tuesday about whether he could see Putin facing them personally. “I would see that.”
But not everyone agrees that such measures are effective.
The former Obama official said targeting oligarchs would do little to coerce Putin, who is sitting on billions of dollars in currency reserves. The strategy is also based on an incorrect view of the power base in Russia, he argued.
The people around Putin today “are largely people from the security services that he came up with,” the so-called “siloviki,” he said. “None of them really have much outside of Russia.”
He continued: “No one’s going to walk into Putin’s office and say, ‘Hey, look, I got sanctioned, my daughter can’t go to London School of Economics this year because of everything you’re doing. You need to stop.’”
A National Security Council official called “inaccurate” a report in The Times that State Department officials had voiced “dismay and frustration” at the British government’s failure to crack down on Russian assets parked by oligarchs inside London.
Another point of contention is how much Washington’s threats are worth and whether the U.S. can draw allies together.
The Biden administration wants to shift Putin’s calculus, keep a united front, all under the premise that “if we use sanctions, we lose the effect of sanctions,” said the aide, an expert on illicit finance. “The problem with that argument is that I’m not sure how much our threats are worth these days. We’ve constantly drawn lines in the sand, which were then crossed, and we didn’t do anything — over and over and over again.”
The American financial system is more powerful now than at any other point in history, he added, with the U.S. able to inflict broad economic damage.
But some say there’s a danger to this.
“We could certainly create a lot of pain for Russian citizens, but with that comes an increased risk of broadening this conflict,” the former Democratic national security council official said. “Every Russian citizen has money in SberBank. I’m not sure you want that.”
Asked to draw a historical precedent, he pointed to Japan after the administration of President Franklin D. Roosevelt led a de facto embargo of oil to Japan amid a war. The response came following the attack on Pearl Harbor in Hawaii.
“You can’t sanction somebody to commit suicide. At a certain point, they’re going fight back by whatever means they have,” the former official said. “For Russia, that’s their military.”
Moscow has denied any plans to invade Ukraine but has demanded security concessions from NATO, including a rollback of forces from former Soviet states and a pledge that the alliance will not add Ukraine as a member. A written response from the U.S. and NATO failed to address Moscow’s concerns over the eastward expansion of the military alliance, Russia’s Foreign Minister Sergey Lavrov said this week.
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“I don’t personally think that sanctions are going to dissuade Putin. From what Biden said, I don’t think he thinks that either, necessarily,” the former national security council official said.
But, he conceded, “we have to act. Politically, you have to act.”
