The Biden administration is evaluating the impact of new sanctions on Russia and is prepared to escalate those penalties if the Kremlin fails to rein in hacking attacks and attempts to interfere with the U.S. political process, according to people familiar with the matter.
Options available to President Joe Biden include expanding the measures announced Thursday to bar U.S. financial institutions from the secondary market for ruble-denominated bonds issued by Russian state banks, said the people, who discussed the matter on condition of anonymity.
Biden ordered the latest sanctions on Russia — including limits on buying newly issued sovereign debt — in response to allegations that Moscow was behind a hack on SolarWinds Corp. and interfered with last year’s U.S. election.
The U.S. also sanctioned a number of entities and individuals, while expelling 10 Russian diplomats working in Washington, including some intelligence officers.
Yet the moves were calibrated by the U.S. to punish the Kremlin for past misdeeds while keeping relations from deteriorating further, especially as tensions grow over a Russian military buildup near Ukraine.
Two days before announcing the sanctions, Biden offered to meet Russian President Vladimir Putin later this year, even as he warned his counterpart about a litany of transgressions.
White House communications staff didn’t immediately offer a comment.
For now, U.S. officials are waiting to see how Putin responds. On Friday, Russia expelled 10 American diplomats and imposed sanctions on eight officials in tit-for-tat moves that stopped short of responding to U.S. restrictions on its sovereign debt.
Foreign Minister Sergei Lavrov told reporters in Moscow that Russia could take steps that harm the interests of U.S. businesses but will hold those in reserve for now.
The Biden administration is also watching global markets to see the impact of its latest measures, including on the ruble, and any shifts in foreign ownership of Russian ruble bonds, according to the people. Interest rate decisions by Russia’s 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 bar U.S. financial institutions from participating in the primary market for new debt issued by the Russian central bank, Finance Ministry and sovereign wealth fund. Those limits would take effect starting June 14.
Russian bonds fell and the ruble dropped the most since December on news of the impending penalties, but recovered their losses on Friday as investors concluded that the measures were milder than had been feared.
White House officials sought to limit the sanctions’ fallout for the U.S. and global financial system while sparing the Russian civilian population from unnecessary harm, the people said. The Biden team now hopes to begin de-escalating tensions and believe that would benefit financial markets and the Russian economy, one of the people said.
Still, U.S. officials are holding in reserve other potential escalations, including moves aimed at preventing secondary market trading in any ruble debt for the first 90 days or more after issuance, the person said.
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