The Biden government is evaluating the impact of new sanctions on Russia and is prepared to increase the fines if the Kremlin does not intervene in attacks and attempts to interfere in the US political process, according to people familiar with the matter.
The options available to President Joe Biden include extending the measures announced Thursday to the issuance of US denominated securities denominated in rubles by Russian state-owned banks, the people, who case discussed on condition of anonymity.
Biden has ordered the latest sanctions against Russia – including restrictions on the purchase of newly issued government debt – in response to allegations that Moscow was behind bars SolarWinds Corp. and interferes with last year’s US election.
The U.S. also approved a number of entities and individuals while expelling ten Russian diplomats working in Washington, including an intelligence official.
Yet steps have been calibrated by the US to punish the Kremlin for wrongdoing in the past, while relations have not deteriorated further, especially as tensions over a Russian military build-up near Ukraine grow.
In another sign of deteriorating relations between the two countries, Russia on Saturday accused a Ukrainian diplomat of stealing information and giving him three days to leave the country on Saturday, the news agency Interfax reported. Ukraine indicated 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 though he had warned his counterpart about a group of violations.
Communication staff in the White House did not immediately comment.
For the time being, US officials are waiting to see how Putin reacts. On Friday, Russia suspended ten U.S. diplomats and instituted eight officials in criminal proceedings against eight officials who no longer respond to U.S. restrictions on its public debt.
Foreign Minister Sergei Lavrov told reporters in Moscow that Russia could take steps that could harm the interests of U.S. businesses, but that they would keep those in the reserve.
Markimpak
The government of Biden is also watching the world 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 next interest rate decision of the Bank of Russia is scheduled for April 23.
Under the sanctions announced Thursday, Biden’s government will ban US financial institutions from participating in the primary market for new debt issued by the Russian central bank, the Ministry of Finance and the sovereign wealth fund. These limits take effect on 14 June.
Russian bonds have fallen and the ruble has fallen the most since the news of the impending fines since December, but recovered their losses on Friday when investors concluded the measures were milder than feared.
White House officials have sought to limit the impact of sanctions on the U.S. and global financial system, while inflicting unnecessary damage on Russia’s civilian population. The Biden team is now hoping to start easing tensions and believes it will benefit financial markets and the Russian economy, one of the people said.
U.S. officials are holding other potential escalations in reserve, including moves aimed at preventing secondary market trading in any ruble debt during the first 90 days or longer after issuance, the person said.
– With the help of Aine Quinn
(Updates with Russia expelling the Ukrainian diplomat in the fifth paragraph.)