Biden announces sanctions on Russia for invading Ukraine. Here's what that means

WASHINGTON – President Joe Biden on Tuesday announced biting U.S. sanctions on Moscow in the wake of Russian President Vladimir Putin's decision to send troops into two regions in eastern Ukraine, which Biden denounced as a "flagrant violation of international law."

Biden said the first wave of U.S. penalties includes "full blocking sanctions" on two major Russian financial institutions, as well as on the country's sovereign debt.

"That means we've cut off Russia's government from Western financing," he said. "It can no longer raise money from the West and cannot trade in its new debt on our markets or the European markets either."

Biden warned that if Putin escalates his assault on Ukraine, "we stand prepared to go further" with sanctions as well.

The new steps will likely ripple across the American economy.

Some U.S. allies in Europe have raised concerns about various steps to punish Russia, warning that Putin could retaliate by cutting off oil and gas supplies that are vital to their countries.

More: Congress has tough words on Putin and Russia's aggression in Ukraine but can't agree on sanctions

Europe gets as much as 40% of its gas from Russia, and countries like Germany could be left in the cold if Putin decides to end their supplies.

Here’s what we know:

Putin's inner circle a target

Members of Putin's inner circle could personally pay a price under the steps Biden outlined on Tuesday, and additional measures are still being considered.

Biden did not say the U.S. would personally target Putin but said the U.S. would impose sanctions on Russia’s elites and their family members, to go into effect on Wednesday.

"They share in the corrupt gains of the Kremlin policies and should share in the pain as well," the president said.

The Russian oligarchs targeted so far are: Aleksandr Vasilievich Bortnikov, director of the Federal Security Service of the Russian Federation, and his son Dennis; Petr Mikhailovich Fradkov, chairman and CEO of PSB, or Promsvyazbank; and Sergei Vladilenovich Kiriyenko, first deputy chief of staff of the presidential office, and his son Vladimir.

"With respect to President Putin ... all options remain on the table," said a senior Biden administration official, who discussed the sanctions with reporters on the condition of anonymity. The official noted that Biden has publicly issued the same threat.

Rose Gottemoeller, a lecturer at Stanford University who was the deputy secretary general of NATO from 2016 to 2019, said the administration's sanctions are significant while still allowing for a lot of “running room.”

“They've been clear that they would come in strong and they come in high,” she said, “but they wanted to have additional waves of sanctions available so they can ramp up the pressure over time.”

Gottemoeller also said the targeting of oligarchs and their families is important because they previously got around U.S. sanctions by handing their properties and other assets over to their children.

“No more hiding assets,” she said.

Targeting a foreign leader personally would be unusual but not unprecedented. Two years ago, the Democratic-led House approved a biting sanctions bill that would have punished Turkish President Recep Tayyip Erdogan personally over Turkey’s assault on U.S.-allied Kurdish forces in Syria.

The legislation, which stalled in the Senate, called for a public assessment of Erdogan’s net worth amid questions about his finances in Turkey.

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Moving money around the world

The sanctions Biden outlined on Tuesday also target two Russian banks, VEB and a military bank called Promsvyazbank, along with the penalties on the country's sovereign debt. The Biden administration said those steps would be the most crippling.

"Today’s actions, taken in coordination with our partners and allies, begin the process of dismantling the Kremlin’s financial network and its ability to fund destabilizing activity in Ukraine and around the world,” Treasury Secretary Janet Yellen said Tuesday.

The U.S. official described the first bank targeted by the U.S. as "a glorified piggy bank for the Kremlin that holds more than $50 billion in assets." He said Promsvyazbank finances the activities of the Russian military.

Collectively, the two institutions hold more than $80 billion in assets and finance the Russian defense sector and economic development, according to the U.S. Treasury Department. The sanctions will freeze their assets in the United States, prohibit U.S. individuals and businesses from doing any transactions with them, shut them out of the global financial system, and foreclose access to the U.S. dollar.

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Nord Stream 2

Before this week's developments, Biden vowed to stop the completed but not-yet-operational Nord Stream 2 gas pipeline from Russia to Germany if Russia invades Ukraine.

On Tuesday, Germany announced it would halt certification of the Russian-owned pipeline. German Chancellor Olaf Scholz said his government would “reassess” the matter in light of Putin's aggression.

"Because of Russia's actions, we've worked with Germany to ensure Nord Stream 2 will not, as I promised, will not move forward," Biden said.

The $11 billion undersea pipeline, a priority for Putin, would allow Russia to send gas to its customers in central and eastern Europe without using land routes that run through the Baltic states and Ukraine. Right now, Russia pays Ukraine about $2 billion a year in transit fees to send the gas through its lines.

The Biden administration said it was working to blunt any rise in gas prices because of the invasion.

"My administration is using every tool at our disposal to protect American businesses and consumers from rising prices at the pump. As I said last week, defending freedom will have costs for us as well," Biden said.

He said the administration is monitoring energy supplies for any disruption.

"I'm going to take robust action to make sure the pain of our sanctions is targeted to the Russian economy, not ours," Biden said.

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What sanctions could come next?

The senior administration official said the sanctions unveiled Tuesday are just the beginning, and the White House was watching Putin's actions closely to determine whether other banks and individuals should be added to the U.S. financial blacklist.

"Other Russian elites and their family members are now on notice that additional actions could be taken on them as well," the official said.

The administration is also threatening sanctions against two of Russia's largest banks, including Sberbank, "which collectively hold almost $750 billion in assets, or more than half the total in Russia as a whole," the official said.

Notably, Biden’s sanctions do not include one of the most severe penalties contemplated: cutting Russia out of the SWIFT financial system, which shuffles money from bank to bank around the globe.

“We are not taking SWIFT off the table,” the senior administration official said. “It will remain an option that we can deploy depending on Russia’s next move.”

Kicking Russia out of the SWIFT financial system would block Moscow from most international financial transactions, including international profits from oil and gas production, which account for more than 40% of the country’s revenue.

The downside? The U.S. economy and those of its allies also could suffer, because it could discourage some Western banks from dealing with Russia, and Moscow could retaliate by cutting oil and gas exports.

“The toughest stick won’t always ultimately be the most intelligent sword,” Annalena Baerbock, Germany’s foreign minister, told reporters in January.

Export controls

The Biden administration has also weighed imposing tough export control measures that could keep Russia from getting high-tech components used in smartphones, airplanes and automobiles.

One option would be to add Russia to the most restrictive group of countries for export control purposes, together with Cuba, Iran, North Korea and Syria.

That would mean Russia’s ability to obtain high-tech components would be severely restricted because virtually all semiconductors are designed with U.S. software and parts. The impact could extend to machine tools, smartphones, game consoles, tablets and televisions.

Sanctions could also target critical Russian industry, including its defense and civil aviation sectors, which would hit Russia’s high-tech ambitions, whether in artificial intelligence or quantum computing.

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Blocking Russian access to US dollars

The U.S. already holds one of the most powerful financial weapons to wield against Putin: blocking Russia from access to the U.S. dollar.

Dollars still dominate in financial transactions around the world, with trillions of dollars in play daily.

Transactions in U.S. dollars ultimately are cleared through the Federal Reserve or through U.S. financial institutions. Crucially for Putin, that means foreign banks have to be able to access the U.S. financial system to settle dollar transactions.

The ability to block that access gives the United States the ability to inflict financial pain well beyond its borders. The U.S. has suspended financial institutions from dollar clearing for violating sanctions against Iran, Sudan and other countries.

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Michael Collins covers the White House. Follow him on Twitter @mcollinsNEWS.

Contributing: Joey Garrison, Maureen Groppe

This article originally appeared on USA TODAY: Russian invasion of Ukraine triggers US sanctions. What's on the list?