The U.S. and European allies are weighing sanctions targeting Russia’s biggest banks and the country’s ability to convert rubles for dollars and other foreign currencies should President Vladimir Putin invade Ukraine, according to people familiar with the matter.
The sanctions – including against some of Russia’s largest banks and the Russian Direct Investment Fund – are among the options that President Joe Biden may spell out when he speaks with Putin on Tuesday, according to the people. The U.S. could also restrict the ability of investors to buy Russian debt on the secondary market, they said.
The options were described by two people familiar with the matter who asked not to be identified discussing private deliberations. The most drastic option would be to bar Russia’s access to the Swift financial payments system, but that would wreak havoc on ordinary citizens so officials are more inclined to go after Russia’s ability to convert rubles into dollars, euros or British pounds, the people said.
Germany’s new government also hinted for the first time that an escalation of the Ukraine crisis may also affect the fate of Nord Stream 2, a pipeline that is to carry gas from Russia and has been a longtime priority for Putin as well as Berlin.
The Biden-Putin call comes with tensions high over what U.S. intelligence has told allies could be a plan to invade Ukraine with as many as 175,000 troops in the coming year. Russia has denied plans to go to war but has also said U.S. and European nations should scale back their support for Ukraine, establishing de facto “red lines” that include barring the former Soviet republic from joining the NATO alliance.
Russian financial markets showed little reaction to the sanctions threats Tuesday, with investors still seeing the risk that Russia would actually invade Ukraine and trigger them as low.
Kremlin spokesman Dmitry Peskov declined to comment on the reports, saying the “emotional statements” of recent days wouldn’t affect the talks.
“It’s obvious that if the presidents are having this conversation, they intend to discuss the issues and not drive things into a dead end,” Peskov told reporters Tuesday.
It’s not clear how much detail Biden will share with Putin on the possible sanctions that would follow an invasion, and most of the actions would be contingent on agreement from allies.
On Monday, Biden took part in a call with the leaders of France, Germany, the U.K. and Italy in which they “discussed their shared concern about the Russian military build-up on Ukraine’s borders and Russia’s increasingly harsh rhetoric,” the White House said in a statement.
“The leaders underscored their support for Ukraine’s sovereignty and territorial integrity,” according to the statement, which was released on Monday evening.
Incoming German Chancellor Olaf Scholz Tuesday called the situation on the Ukrainian border “serious.” At the same press conference, future Vice Chancellor Robert Habeck said that as part of the ongoing regulatory review process for the Nord Stream 2 pipeline, authorities “will surely also discuss how the political situation in Ukraine and Europe’s ability to deescalate can be brought together.” Habeck’s Green Party has long opposed the pipeline.
Overall, the measures Biden is considering are part of an American effort to claw back some of the leverage Putin has amassed over Ukraine and, more broadly, the U.S. and its European allies. The Russian leader has made clear that he’s willing to invade Ukraine – his forces did so in 2014 – to protect what he sees as vital national security interests, and he has shown a willingness to tamper with energy markets by threatening to cut supplies to Europe.
“The reason Putin has so much leverage is he’s clearly willing to pay the price,” Matthew Rojansky, director of the Kennan Institute at the Wilson Center in Washington, said of past U.S. moves to sanction Russia that had little effect. “But we’ve got loads more ammunition, there’s lots of stuff we could do. It’s just that no one has ever believed we would go to those lengths.”
Biden’s Tuesday call with Putin, which will be the pair’s fourth conversation since the American president took office in January, is also meant to provide a way to defuse tensions that have crested again after an earlier Russian troop buildup in the spring first raised fears of war.
“The goal here is signal lots of action up front so you don’t have to do it, but making sure the threat is credible,” Rojansky said.
A senior Biden administration official, speaking to reporters on Monday, made clear that the U.S. doesn’t want to commit its troops to Ukraine in the event of a Russian invasion. At the same time, the official said the U.S. would help Ukraine and send more forces and capabilities to NATO allies bordering Russia. The official also declined to detail the steps the U.S. would take if there’s a Russian invasion.
The call will help determine whether Biden’s desire for a functioning relationship with Russia is possible or whether the dynamic will just ricochet from crisis to crisis – including cyberattacks, the potential invasion of Ukraine and continuing disputes over Russia’s provision of energy to Europe.
Last week, Biden previewed his interest in taking a tougher approach, saying, “What I am doing is putting together what I believe to be will be the most comprehensive and meaningful set of initiatives to make it very, very difficult for Mr. Putin to go ahead and do what people are worried he may do.”
Ukrainian President Volodymyr Zelenskiy said in a tweet Monday that he had spoken with U.S. Secretary of State Antony Blinken and they “agreed to continue joint & concerted action.”