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New U.S. sanctions on Russia mainly hit banks, miss energy sector

President Joe Biden announced a second and larger sanctions package on Russia, punishing Vladimir Putin for ordering a full-scale invasion of Ukraine but stopping short of targeting some critical sectors of his nation’s economy.

Speaking in generalities from the White House, Biden said his administration would stunt the Russian military’s ability to finance and grow its force; freeze U.S. assets held by Russian banks, including VTB; target elites and members of Putin’s inner circle; and curtail Russia’s high-tech imports in a way that could damage Moscow’s aerospace industry.

Minutes later, the White House and Treasury Department released fact sheets detailing the moves: cutting off Sberbank from the U.S. financial system; placing full blocking sanctions on VTB and three other Russian financial institutions; imposing new debt and equity restrictions on 13 enterprises and entities; targeting seven Russian elites and their families; and hitting 24 Belarusians for supporting Russia’s invasion.

The U.S., alongside its allies in Europe and Asia, are “preparing to do more,” Biden said.

Notably, the president didn’t announce crushing sanctions on Russia’s energy sector, including conglomerates like Rosneft. He did say the sanctions might not have an immediate effect, but over time could prove punishing for Putin. “Let’s have a conversation in another month or so to see if they’re working,” he said.

The administration is concerned about global energy markets, a person familiar with the situation told POLITICO. Another person familiar said the focus of the sanctions this time around was on financial institutions.

A senior administration official told POLITICO before Biden’s speech that “no option is off the table,” but “starting out with energy could actually benefit Putin and pad his pockets. Given high oil and gas prices, cutting off Russian oil and gas will drive prices up to Putin’s benefit. And as we have said repeatedly on the record, on background [and] off the record, our sanctions are designed to harm Russia’s economy, not ours.”

Asked whether sanctions to be announced on both sides of the Atlantic will be big, a European official simply replied: “Yes.”

Biden also announced the deployment of ground and air forces to countries on NATO’s eastern front, including Estonia, Latvia, Lithuania, Poland and Romania — though he reiterated that U.S. troops won’t go into Ukraine to fight Russia.

Biden’s announcement came hours after Putin sent his troops into Ukraine from the north, east and south, while Russian warplanes and artillery units struck nearly 20 Ukrainian cities with precision-guided cruise missiles and conventional bombs. Ukrainian officials said more than 40 troops were killed and dozens of others were wounded. A senior defense official told reporters Thursday that Russia intends to “decapitate” the Ukrainian government and install its own puppet regime in the Ukrainian capital of Kyiv.

Biden and Secretary of State Antony Blinken met their counterparts this morning in an extraordinary virtual meeting of the G-7 to discuss actions after the invasion, after which they agreed on a package of sanctions. That grouping was once known as the G-8, but Russia was kicked out because of its annexation of the Crimean Peninsula and incursion into Ukraine’s Donbas region in 2014.

The West’s sanctions strategy, for months, was intended to deter Moscow from further invading Ukraine. Now it is designed to punish Russia’s economy for Putin’s war and the actions of its forces in Ukraine. After Moscow’s troops entered two Kremlin-backed breakaway regions in the Donbas on Tuesday, the U.S. fully blocked two Russians banks from the global financial system, targeted five Russian elites and their families and curtailed access to the country’s sovereign debt.

Ukrainian leaders spent much of Thursday publicly messaging for Washington and European capitals to use all of their sanctions weapons on Russia at once.

“I will not be diplomatic on this,” Ukraine’s top diplomat Dmytro Kuleba wrote on Twitter. “Everyone who now doubts whether Russia should be banned from SWIFT has to understand that the blood of innocent Ukrainian men, women and children will be on their hands too. BAN RUSSIA FROM SWIFT,” Kuleba wrote referring to the Society for Worldwide Interbank Financial Telecommunication.

A document obtained by POLITICO showed Kyiv was pushing the U.S. to cut off Russia from the SWIFT financial messaging system, place an embargo on Russian oil and gas, sanction nearly all of Moscow’s most important banks, and ban flights on any Russian carriers.

It’s widely expected that the final step in the sanctions escalation will be reserved for the capture of Kyiv, and will personally target Putin’s assets and prohibit the Russian Central Bank’s access to the U.S. dollar.

EU diplomats are questioning whether to include Putin on the new sanctions list or potentially wait for his next move that would trigger additional penalties. Proponents of sanctioning the Russian president now argue that the discussions on what should elicit such a response have been exhausted and not doing so immediately would convey weakness on the EU’s part.

Opponents of such a decision say it would be better to keep this option open in the hopes of using more diplomacy to end the conflict. “Feel free to add it to the reasons why I expect a lengthy discussion” tonight among leaders, one European diplomat said.

Biden refused to answer a question from the press about whether he would sanction Putin directly in future rounds, but said he had no plans to talk to the Russian leader.

Jacopo Barigazzi contributed to this report.

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