U.S. Looks to New Measures to Punish Russia for Ukraine Invasion

The U.S. on Friday sanctioned President Vladimir Putin of Russia as part of a broad range of new measures that the Biden administration is preparing in hopes of inflicting financial pain on Moscow after Russia invaded Ukraine.

Penalties targeted not only Mr. Putin but members of his inner circle. The U.S. will also impose full blocking sanctions on the state-owned Russian Direct Investment Fund, a sovereign-wealth fund, according to White House press secretary Jen Psaki. The administration’s broader aim, should Russia continue its incursion in Ukraine, is to target all of Russia’s banks on a rolling basis, a U.S. official said.

The U.S. is also exploring more novel strategies, such as sanctioning Russia’s cryptocurrency market.

The latest moves, and those under consideration, follow a slew of sanctions that the U.S. has already imposed. This week, the Biden administration made public what it described as the “first tranche” of sanctions against Russia, including penalties on its two largest banks and scores of others, members of Mr. Putin’s inner circle and Russia’s sovereign debt.

Mr. Biden, a Democrat, also said his administration would impose sanctions on the company and executives behind the Nord Stream 2 pipeline, a decision that followed Germany’s announcement that it would cancel certification of the pipeline.

The Treasury Department said its actions target 80% of all banking assets in Russia and limit the country’s access to the global financial system.

U.S. officials say the pressure campaign takes time to work, which is one of the reasons the administration has reserved some of its sanctions firepower. “They need to be sustainable,” said Daleep Singh, deputy national security adviser for international economics. “They work over time, not on day one.”

Taken together, the moves show how the U.S. and its allies are grappling with how to respond to Russia’s violent assault on Ukraine. Since launching the invasion earlier this week, Russian forces have proceeded to close in on Kyiv, alarming Western officials who fear the Ukrainian government could collapse. .

Ukraine President Volodymyr Zelensky on Thursday pleaded for faster and more forceful action from the West. “This may be the last time you see me alive,” he told European leaders in a call late Thursday, according to two officials familiar with his comments. A Ukrainian government spokesman later denied he said it.

The West has been struggling to adopt measures that will deter further Russian aggression.

On Friday, the European Union agreed to freeze any European assets of Mr. Putin and Russian Foreign Minister Sergei Lavrov.

Also on Friday, Switzerland prohibited its banks from doing new business with any of the individuals, banks or companies on the EU sanctions list to help prevent Russia from circumventing those sanctions.

Meanwhile, the British government is pressuring British oil giant BP PLC to offload its minority stake in Russian oil company PAO Rosneft, citing the Russian firm’s links to the Kremlin and accusing Rosneft of fueling the Russian army’s advance into Ukraine, according to a person familiar with the matter.

Biden administration officials said the EU move to sanction Mr. Putin caught Washington by surprise. Washington and the EU had committed to joint action, particularly against major targets like Mr. Putin, and so the EU action prompted an acceleration of the Biden administration’s decision, these officials said.

In the U.S. announcement Friday, White House press secretary Jen Psaki said that the administration was targeting Mr. Putin, Mr. Lavrov and other members of Russia’s national security team. The punitive action includes restrictions on Mr. Putin’s ability to travel to the U.S. The decision to hit his Russian counterpart with sanctions was one Mr. Biden ultimately made himself, these officials said.

Beyond the measures announced Friday, the Biden administration is preparing to target all of Russia’s banks, a U.S. official said. The U.S. is looking at potential cyberattacks on Russia’s cryptocurrency market that would also aim to disrupt economic activity in the country, the official added.

Among the biggest steps not yet taken is disconnecting Russia from the financial-messaging infrastructure that links the world’s banks, the Belgium-based cooperative called Swift. Mr. Biden has said the option is still on the table, but officials say the White House isn’t ready to levy that penalty.

U.S. officials say that they plan to preserve the ability for Russia’s financial system to continue to make some international payments as part of their strategy to mitigate the economic fallout on Western companies, economies and global inflation. That will force a costly restructuring of the banking sector, say economists.

“We’re open to taking additional actions to constrain and degrade Russia’s economy, including looking at Swift, which we want to do in concert with our allies and partners, especially in Europe,” another senior administration official said.

So far, the Biden administration hasn’t given any indications that it will move beyond financial sanctions. U.S. officials said the two questions being discussed at the White House are what to do now, and what to do if the Ukrainian government falls.

Earlier this year, the Biden administration approved $200 million in military aid to Ukraine, including at least 300 Javelin antitank missiles. Since the invasion, the U.S. hasn’t said whether it would provide more weapons, ammunition or other military aid, despite repeated requests from the Ukrainian government.

U.S. defense officials said Friday they continue to look for ways to support the Ukrainian armed forces, but declined to say what form that would take or when any additional support would be given. Defense Secretary Lloyd Austin was leading a donor’s conference Friday in Washington to help determine what kind of military support the alliance could provide Ukraine, officials said.

The British government is also looking to increase its direct support for the Ukrainian military, in conjunction with allies and potentially in more unilateral support. The Ukraine government is looking for more uniforms, helmets and antitank weapons, said Ed Ferguson, the minister counselor of defense at the British Embassy in Washington, and London is considering that direct support as well.

The other issue on the table for administration has been whether and how to support an insurgency should the government in Kyiv collapse, U.S. officials said, but no decision has been made on that.

Senior administration officials say they plan to continue sanctioning oligarchs and other Putin allies, as well as their family members. Washington also plans to hit other state-owned companies and some remaining financial institutions to further squeeze the Russian economy.

Justine Walker, head of sanctions and risk at the Associate of Certified Anti-Money Laundering Specialists, said international sanctions can be strengthened by making them match U.S. actions.

“There is definitely still room for escalation of sanctions, and that depends on what happens in Ukraine over the next 24-48 hours,” said Ms. Walker, whose group is composed of compliance officers at banks and companies around the world.

Given what she called an unprecedented levying of sanctions against Russia this week, policy makers are hoping their actions will help de-escalate the conflict. But, she added, “if you suddenly saw all of the Western countries all taking very aligned measures, that would be a level of upscaling,” she said.

While many have called for sanctions targeting Mr. Putin himself, some within the administration now worry that the move to personally hit the Russian president will complicate efforts to find an off ramp to the conflict.