Here’s What You Need to Know about the U.S. Policy Response to Russia’s Invasion of Ukraine, So Far …
Congress returns next week to a full agenda with SOTU, an expected Supreme Court nomination, and finalizing the annual government spending for the current fiscal year. The dominant issue of the day, week, and foreseeable future, however, is the Russian full-scale invasion of Ukraine and the US role in the global response to the worst security crisis in Europe since the end of World War II. Here’s what’s gone down so far:
Biden Administration Responds
Anticipating the act of aggression by Russian President Vladimir Putin, the Biden Administration acted this week targeting tough sanctions toward Russia and enlisted other nations in punitive measures that will continue to escalate. White House fact sheets and statements on these actions can be found here:
- President Biden’s Executive Order to impose costs for President Putin’s action to recognize DNR and LNR as “independent” states.
- White House Fact Sheet on First Tranche of Actions against Russia.
- President Biden’s Statement on Nord Stream 2.
- White House Fact Sheet on Second Tranche of Actions against Russia.
After participating in a G-7 meeting on the Ukrainian invasion, President Biden addressed the nation Thursday in which he laid out his case for why action was needed, the threat to NATO alliances and the further steps the Administration is planning to take given the severity of Putin’s moves.
*NOTE: A complete list of actions carried out by the U.S. as described by the White House can be found below at the bottom of this post.*
Before this week’s Congressional recess, there was a bipartisan attempt to push preemptive sanctions prior to the invasion that could not get final agreement. Congress may yet try again to move legislation authorizing further moves by the US to level financial penalties against Russia.
President Biden received notable support from key House Republican foreign policy leaders for the Administration’s efforts to address the attack on Ukraine, but some Republicans voiced criticism that he did not act strong enough, early enough reflecting the party’s lack of consensus on how to position itself on Russia in the post-Trump era.
As the conflict continues, expect further congressional action, most likely led by Senate Foreign Relations Chairman Bob Menendez (D-NJ) and Ranking Member Jim Risch (R-ID) as well as House Foreign Affairs Committee Chairman Greg Meeks (D-NY) and Ranking Member Michael McCaul (R-TX).
U.S. Political Implications
Helpful to Biden Administration
Polarized as our politics may be, the threat of international war does tend to create a rally around the flag. By demonstrating steadfast, decisive leadership, President Biden has a chance to not only bring the country together against a common enemy – Russia – but also to demonstrate renewed Western/NATO strength as well as to buoy his less than stellar poll numbers in a midterm election year. And just like Justice Breyer’s retirement, the Russia-Ukraine conflict also offers a welcome change of narrative for Biden after months of negative headlines re: inflation, gas prices, supply chain crisis. The crisis has also put Trump back in the news again for calling Putin’s invasion of Russia ‘smart,’ reminding moderate or on-the-fence voters why they voted for Biden in the first place. Meanwhile, President Biden’s pledge to not send in troops offers a welcome sigh of relief for many Americans weary of entering yet another war.
Challenging for Biden Administration
While Americans overwhelmingly oppose playing a major role in the Russia-Ukraine conflict ,over two-thirds of Americans do support even stronger sanctions on Russia. However, stronger sanctions are likely to contribute to even higher rates of inflation, further souring Americans’ already negative view of Biden’s handling of the economy. On the flip side, pulling back on sanctions could make President Biden seem weak, furthering the narrative that Republicans have been pushing since the Afghanistan retreat that Biden seems ‘unsure,’ ‘incompetent,’ and not fit to lead.
Not to mention, conflict with Russia is stressful and it’s only likely to get worse before it gets better. Focusing on the conflict also derails from the administration’s broader agenda (think climate change, taxes, social safety nets, etc.) which is critical to garnering and mobilizing progressive and democratic support this midterm election cycle.
Business Impacts & Policy Implications
There are no ifs and or buts about it: conflict with Russia is bad for economic recovery. The administration’s actions against Russia are likely to lead to worsening inflation, longer supply chain snafus, export restrictions, and more. This in turn raises ‘stagflation’ risks as the Fed slows the economy while our geopolitical response maintains high rates of inflation.
Meanwhile, the conflict is likely to accelerate certain policy priorities, mainly: appropriations (including the supplemental), sanctions, USICA, cyber, trade deals with allies, antitrust oversight content moderations oversight (think combating Russian disinformation) – all with broad implications for U.S. businesses. At the same time, conflict is likely to slow movement on the Build Back Better Act, decarbonization efforts, tax increases, and antitrust legislation.
List of Presidential Actions
- Severing the connection to the U.S. financial system for Russia’s largest financial institution, Sberbank, including 25 subsidiaries, by imposing correspondent and payable-through account sanctions.
- Full blocking sanctions on Russia’s second largest financial institution, VTB Bank (VTB), including 20 subsidiaries.
- Full blocking sanctions on three other major Russian financial institutions: Bank Otkritie, Sovcombank OJSC, and Novikombank- and 34 subsidiaries.
- Costs on Belarus for supporting a further invasion of Ukraine by sanctioning 24 Belarusian individuals and entities, including targeting Belarus’ military and financial capabilities by sanctioning two significant Belarusian state-owned banks, nine defense firms, and seven regime-connected official and elites. We call on Belarus to withdraw its support for Russian aggression in Ukraine.
- Sanctions on Nord Stream 2 AG and its corporate officers.
Full blocking sanctions on two significant Russian financial institutions that provide key services crucial to financing the Kremlin and the Russian military: Vnesheconombank and Promsvyazbank and their subsidiaries.
- Full blocking sanctions on certain Russian elites and their family members: Aleksandr Bortnikov (and his son, Denis), Sergei Kiriyenko (and his son, Vladimir), and Promsvyazbank CEO Petr Fradkov, Sergei Ivanov (and his son, Sergei), Nikolai Patrushev (and his son Andrey), Igor Sechin (and his son Ivan), Andrey Puchkov, Yuriy Solviev (and two real estate companies he owns), Galina Ulyutina, and Alexander Vedyakhin.
- The Secretary of the Treasury will determine that any institution in the financial services sector of the Russian Federation economy is a target for further sanctions.
- President Biden’s EO provides authority to impose sanctions on persons determined: 1) To operate or have operated since the date of the order in the DNR or LNR regions; 2) To be or have been since the date of the order a leader, official, senior executive officer, or member of the board of directors of an entity operating in the DNR or LNR regions; 3) To be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, any person whose property and interests in property are blocked pursuant to this order; and, 4) Or to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, any person whose property and interests in property are blocked pursuant to this order.
Corporate, Military, and Trade Restrictions
- New debt and equity restrictions on thirteen of the most critical major Russian enterprises and entities. This includes restrictions on all transactions in, provision of financing for, and other dealings in new debt of greater than 14 days maturity and new equity issued by thirteen Russian state-owned enterprises and entities: Sberbank, AlfaBank, Credit Bank of Moscow, Gazprombank, Russian Agricultural Bank, Gazprom, Gazprom Neft, Transneft, Rostelecom, RusHydro, Alrosa, Sovcomflot, and Russian Railways.
- Sweeping restrictions on Russia’s military to strike a blow to Putin’s military and strategic ambitions. This includes measures against military end users, including the Russian Ministry of Defense. Exports of nearly all U.S. items and items produced in foreign countries using certain U.S.-origin software, technology, or equipment will be restricted to targeted military end users. These comprehensive restrictions apply to the Russian Ministry of Defense, including the Armed Forces of Russia, wherever located.
- Russia-wide restrictions to choke off Russia’s import of technological goods critical to a diversified economy and Putin’s ability to project power. This includes Russia-wide denial of exports of sensitive technology, primarily targeting the Russian defense, aviation, and maritime sectors to cut off Russia’s access to cutting-edge technology. In addition to sweeping restrictions on the Russian-defense sector, the United States government will impose Russia-wide restrictions on sensitive U.S. technologies produced in foreign countries using U.S.-origin software, technology, or equipment. This includes Russia-wide restrictions on semiconductors, telecommunication, encryption security, lasers, sensors, navigation, avionics and maritime technologies.
- Expanded sovereign debt prohibitions restricting U.S. individuals and firms from participation in secondary markets for new debt issued by the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation.
- President Biden’s EO prohibits: 1) New investment in the DNR or LNR regions by a U.S. person; 2) The importation into the U.S., directly or indirectly, of any goods, services, or technology from the DNR or LNR regions; 3) The exportation, reexportation, sale, or supply, directly or indirectly, from the U.S. or by a U.S. person, of any goods, services, or technology to the DNR or LNR regions; and, 4) Any approval, financing, facilitation, or guarantee by a U.S. person, of a transaction by a foreign person where the transaction by that foreign person would be covered by these prohibitions if performed by a U.S. person or within the U.S.
- President Biden’s EO also directs the Treasury to issue six General Licenses to ensure that humanitarian and other related activity can continue in the DNR and LNR Regions.
- Historical multilateral cooperation that serves as a force multiplier in restricting more than $50 billion in key inputs to Russia- impacting far more than that in Russia’s production. As a result of this multilateral coordination, we will provide an exemption for other countries that adopt equally stringent measures. Countries that adopt substantially similar export restrictions are exempted from new U.S. licensing requirements for items produced in their countries.