US sanctions on Russia would impose ‘severe and overwhelming’ economic costs, officials say

By Natasha Bertrand

The US is prepared to impose a range of harsh economic penalties on Russia should it move to invade Ukraine, starting with high-impact targets that would impose “severe and overwhelming costs on Russia’s economy,” Biden administration officials tell CNN.

The sanctions could have major impacts on Russian consumers, industrial operations and employment, the sources said, and would in some instances put Russia in the same restrictive group of countries for export control purposes as Cuba, Iran, North Korea, and Syria.

The US and Russia are set to meet on Monday for high-stakes talks aimed at averting a war, as Russia has continued to amass troops near Ukraine’s borders. But the US officials said that if the talks fail and Russia does launch a new attack, the US will go straight for high-impact targets — unlike in 2014, when the US initially responded to Russia’s annexation of Crimea by targeting smaller Russian banks and lower-level military officials.

The officials said that instead, the administration will adopt a “start high, stay high” approach in which the US, in coordination with allies, will target its financial system and sectors deemed critical to the Kremlin.

The change in strategy is both a recognition that sanctions to date have not changed Russian President Vladimir Putin’s behavior, and a reflection of Biden’s own convictions. As vice president in 2014, Biden urged President Barack Obama to impose harsher sanctions on Russia and arm Ukraine. But he was ultimately overruled.

As President, Biden has promised “severe consequences” on the Russian economy if Putin orders a full-scale invasion of Ukraine.

Sources familiar with the sanctions options said the administration is preparing a range of significant trade restrictions should Russia attack, including export control measures that could halt Russia’s ability to import smartphones and key aircraft and automobile components.

The restrictions could also hamper Russia’s technological advancements, including in the defense and civil aviation sectors, the sources said. Through the Foreign-Produced Direct Product Rule that the US has also imposed against Chinese tech company Huawei, the Biden administration is weighing banning exports to Russia of microelectronics — think computer chips — designed with US software or produced using US equipment.

Some Biden administration officials have in recent weeks warned of collateral economic damage from harsh sanctions and the risk of retaliatory Russian cyberattacks should the US follow through with the penalties. But others in the administration believe the tough sanctions being weighed would have a manageable impact on the US, and said the US is taking steps along with allies to mitigate any unwanted spillover effects.

Missile deployments

The Biden administration is open to discussing missile deployments in Ukraine and Europe and the possibility of restricting US and NATO exercises during the upcoming talks as long as Russia makes “reciprocal” commitments, according to another senior administration official.

The official noted Biden has told Putin that the US has no plans for offensive missile deployments in Ukraine. The US is also willing to discuss the future of some missile systems in Europe along the lines of the now-defunct Intermediate-Range Nuclear Forces Treaty.

The official stressed, however, that the upcoming bilateral talks between Russian and American officials will not result in any immediate, concrete agreements and that officials will need to bring anything discussed back to Washington and confer on it with American allies in the region.

“We’re going into these meetings with a sense of realism, not a sense of optimism,” the official said, noting that the US will not know until the talks get underway if Russia is prepared to negotiate “seriously and in good faith.”

This official highlighted that troop numbers or American/NATO’s force posture in Europe are definitively not on the table in the upcoming talks; Pentagon press secretary John Kirby said in a tweet on Wednesday that force changes are not on the table.

Kirby wrote: “Can state unequivocally that we are NOT weighing cuts to troops in Europe or posture changes there. Also not looking at changing troop numbers in the Baltics and Poland.”

The official also emphasized that the Kremlin’s remarks during or after the meeting, or what is reported by state-run media in Russia, may not actually reflect what is accomplished in the room.

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