U.S. President Joe Biden has imposed extensive new sanctions against Russia, including measures he has long feared aimed at its government debt, in a sharp escalation of Washington’s showdown with Moscow.
The first anti-Russian measures from the Biden administration include the expulsion of 10 Russian diplomats from the U.S. and sanctions against 38 entities, individuals and companies accused of participating in efforts to interfere in U.S. elections and conduct cyber attacks.
Biden said the sanctions were a response to “an unusual and extraordinary threat to the national security, foreign policy and economy of the United States, which poses certain harmful foreign activities of the government of the Russian Federation.”
On Wednesday, the United States officially blamed SVR, Russia’s foreign intelligence service, for the first time Hack SolarWinds, which involved at least nine federal agencies and 100 companies. A senior administration official told reporters that the hacking had given Russia “the ability to spy on or potentially disrupt more than 16,000 computer systems worldwide.”
The news of the measures sparked a sell-off of Russian property and a warning to the Kremlin that it would harm efforts to reduce tensions between the two countries.
Fresh sanctions prohibit U.S. financial institutions from trading in newly issued Russian government debt, known as OFZ, and bonds of Russia’s central bank and National Wealth Fund. The ban affects debt issued after June 14th.
Measures aimed at the new state debt have long been considered a “nuclear option” for the United States and a turning point in Washington’s sanctions regime against Russia, which has been expanding since the first round of restrictions was imposed by the Obama administration in response to Moscow’s 2014 annexation. Crimea.
The White House said the new package of sanctions would “impose costs on the actions of the Russian government that it wants to harm”, but a senior administration official said the measures should have been “proportionate”, taken solely in light of past actions and to avoid escalation. . The official added that some American answers would “remain unseen”. The moves come after harsh condemnation of Washington and other NATO forces over Russia’s heavy military construction near its border with Ukraine.
The package includes sanctions against 32 people and organizations accused of meddling in the recent U.S. election and six Russian technology companies allegedly supporting the country’s intelligence services, given the hacking of SolarWinds.
The ruble fell as much as 2.2 percent in early trading on Thursday, to about 77.5 for the US dollar. It cut some of its initial losses and fell 0.7 percent to 76.41 by 14:00 London time.
The drop erased gains made earlier in the week following a call Tuesday between Biden and his counterpart, Vladimir Putin, when leaders discussed potential joint summit aimed at relieving tension.
The Moscow reference index Moex fell 0.6 percent, while the RTS index denominated in dollars was 1.8 percent lower.
The yield on 10-year bonds in the country rose 0.19 percentage points to 7.24 percent, a touch below recent highs. An increase in yield indicates a drop in price.
Both the EU and NATO issued statements expressing “solidarity” with the United States over the sanctions.
Dominic Raab, the British foreign minister, said the US and the UK were aware of Russian actions to undermine their democracies. “[We] they call for Russia’s malicious behavior in order to enable our international partners and companies at home to better defend themselves and prepare against such action, “he said. “Britain will continue to work with its allies to denounce Russia’s ugly behavior where we see it.”
The British Security Review, published last month, identified Russia as the “sharpest threat” to its national and collective security, citing Moscow’s “hostile and destabilizing” activity.
Russia’s foreign ministry has responded to news of the sanctions by calling on the US ambassador to Moscow for what has been said to be a “difficult” debate.
“Such aggressive behavior will certainly be strongly repulsed, and a response to sanctions will be inevitable,” ministry spokeswoman Maria Zakharova told reporters. “Washington must realize that it will pay for the degradation of bilateral relations.”
The Kremlin said earlier on Thursday that new sanctions could lead to efforts to negotiate a planned summit of the two leaders.
The Biden administration has begun development of measures to punish Russia after the hacker SolarWinds, which officials at the time said was “probably of Russian origin.”
Russia has denied involvement and said it has never tried to influence foreign elections.
The United States has also condemned the recent arrest and imprisonment of Russian opposition activist Alexei Navalny after recovering from suspicion of an assassination attempt, and accused Moscow of threatening Ukraine by deploying tens of thousands of troops to the country’s border.
A senior administration official said the U.S. is not taking any countermeasures given the U.S. intelligence assessment which concluded with only “low to moderate confidence” that Russian intelligence paid the Taliban to attack U.S. and Allied personnel in Afghanistan in 2019 and perhaps earlier. The official said the United States would issue “strong direct messages” to Moscow instead.
The share of Russian treasury bonds denominated in rubles held by foreigners fell to a five-year low of 20.2 percent in March, from more than 30 percent a year earlier.
The sanctions will test Russia’s finance ministry’s plans to mitigate the impact of the restrictions on its government debt. Potential countermeasures include a break in issuing and easing regulations for Russian borrowers, Deputy Finance Minister Vladimir Kolychev told FT late last year.
The Ministry is also convinced that, if necessary, it can completely replace foreign OFZ owners through domestic demand.
After canceling bond sales in March due to market instability and fears of sanctions, Russia sold a record 354 billion ($ 4.6 billion) in OFZs a week later, with most issues going to Kremlin-run banks.
Additional reporting by Max Seddon of Moscow, Lauren Fedor of Washington and Hannah Murphy of San Francisco