Biden’s opening sanctions salvo

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Feb 22, 2022 View in browser   By Renuka Rayasam THE LATEST RUSSIA-UKRAINE HEADLINES  — Blinken-Lavrov off: In remarks at a joint press conference alongside Ukrainian Foreign Minister Dmytro Kuleba, Secretary of State Antony Blinken said: "Last week I agreed to meet Russian Foreign Minister Sergey Lavrov this week, on Feb. 24, to discuss our countries' respective concerns about European security, but only if Russia did not invade Ukraine. Now that we see the invasion is beginning and Russia has made clear its wholesale rejection of diplomacy, it does not make sense to go forward with that meeting at this time." — More troops headed east: President Joe Biden announced new U.S. deployments from within Europe to the three Baltic NATO states, Estonia, Latvia and Lithuania. The new deployments will include about 800 infantry troops based in Italy, which will head to the Baltic, along with dozens of aircraft that will fan out among allied nations in NATO's east. — Putin recognizes whole Donbas claim: Russian President Vladimir Putin said he recognized Moscow-backed separatists' claims to the whole of Ukraine's Donbas region, ratcheting up the potential of direct confrontation with Kyiv's troops. — EU limits Moscow access to markets: The European Union agreed to impose a range of sanctions on Russia, including curbs on Moscow's ability to raise capital on the EU's financial markets , European Commission President Ursula von der Leyen said. And, speaking of sanctions … President Joe Biden speaks on developments in Ukraine and Russia, and announces sanctions against Russia, from the East Room of the White House. | Drew Angerer/Getty Images TRANCHE WARFARE — Biden's response to Putin moving troops into eastern Ukraine: a "first tranche" of sanctions against two Russian banks and individual Russian oligarchs , in addition to cutting off much of Russia's sovereign debt from Western financing. Some Republicans in Congress are calling on Biden to take an even more aggressive stance against Russia. Sen. Lindsey Graham (R-S.C.) called the moves "woefully inadequate" and said he would work with Democrats for "more crippling" sanctions. But crippling sanctions could also backfire: The S&P closed down more than 10 percent from January highs today, after Biden's announcement. Biden also acknowledged he wants to hold back some U.S. firepower giving American allies room to maneuver with Putin. "I am hoping diplomacy is still available," Biden said at the end of his address. Nightly chatted with Morning Money author Kate Davidson over Slack today about the potential impact of a sanctions regime both in the U.S. and in Russia. This conversation has been edited. Senate Minority Leader Mitch McConnell said he wanted "tough" sanctions against Russia. Does what Biden announced today count as tough?  They include what are called "full blocking sanctions" against two major Russian banks, VEB and a Russian military bank. That's a pretty dramatic step, but those often come with exceptions which we don't know yet. In addition they moved to cut off Russia from western financing by imposing sanctions on its sovereign debt. That means essentially the government can't raise any new debt from U.S. or European markets. If Russia can't tap debt markets to raise money, it can't finance its operations. To help put this in perspective, think about the drama surrounding our own debt ceiling in the U.S., when Congress needs to raise the limit or risk a default. It rattles investors, raises borrowing costs, and just generally threatens to undermine financial and economic stability. The question is to what extent Russia can insulate itself, by relying on reserves or turning to other investors outside the U.S. and Europe to secure financing. Biden also announced sanctions on Russian individuals. How much will this hurt the average Russian oligarch who probably has lots of cash in Swiss bank accounts? I spoke with one sanctions expert today who said these measures typically have a big effect on the person sanctioned, but little effect on the broader economy. The U.S. and its allies have been broadcasting these moves for weeks now, so it's possible the oligarchs have been able to move money to avoid some of the sting of these sanctions. In some ways, this person said, it may make these oligarchs more reliant on Putin by cutting them off from the West. If this is the first tranche, what is next? Officials have said export and re-export controls are still on the table. That would prevent U.S. technology and goods from making its way to Russia, either directly or through third-country exports. That means the restrictions would apply to exports sent to China, for example, that are then placed on goods and passed on to Russia. The White House and sanctions experts with whom I've spoken have said this would seriously crimp Putin's ability to keep industrializing his economy, by affecting the military and other high-tech sectors. And what about the impact on the U.S.?  The risk of big, broad, devastating sanctions is that they can come back to bite you. And administration officials have tried to be careful about calibrating these in a way that they hurt Putin and curb his ambitions, but don't cause undue pain for ordinary Russians, or for the U.S. and its allies. But Biden basically acknowledged today what economists and investors have been expecting — that this confrontation and the ensuing sanctions could cause energy and commodity prices to spike. In the U.S., it almost surely means higher prices at the gas pump. That's not great for the White House, which is already grappling with historic inflation. Washington reacts: Video producer Renee Klahr has a roundup of politicians' and officials' reactions to today's sanctions announcements, and Russia's moves around Ukraine. Welcome to POLITICO Nightly. Reach out with news, tips and ideas at nightly@politico.com. Or contact tonight's author at rrayasam@politico.com, or on Twitter at @RenuRayasam.   JOIN THURSDAY TO HEAR FROM MAYORS ACROSS AMERICA: The Fifty: America's Mayors will convene mayors from across the country to discuss their policy agendas, including the enforcement of Covid measures such as vaccine and mask mandates. We'll also discuss how mayors are dealing with the fallout of the pandemic on their local economies and workforce, affordable housing and homelessness, and criminal justice reforms. REGISTER HERE.     What'd I Miss? — Pentagon weighs request for D.C. National Guard help ahead of trucker protests: The Pentagon said it is considering a request to deploy the National Guard to provide assistance ahead of trucker protests that could halt traffic around the nation's capital as soon as this week. Pentagon press secretary John Kirby said the department received a request for Guard support from the U.S. Capitol Police and the D.C. government, but had not yet decided to approve the request. — Arbery killers found guilty of federal hate crimes: The three white men convicted on state charges in Georgia for the murder of Ahmaud Arbery were found guilty today of federal hate crimes . Jurors agreed with prosecutors that the men, Greg and Travis McMichael, a father and son, and their neighbor William "Roddie" Bryan chased, cornered and targeted the 25-year-old while he was out for a jog because he was Black. Jurors also found all three men guilty of attempted kidnapping. The headquarters of the WTO in Geneva, Switzerland. | Robert Hradil/Getty Images — Vaccine advocacy groups press Biden to break WTO deadlock: Vaccine advocacy groups are pressing Biden to help break a nearly two-year-old deadlock at the World Trade Organization by embracing South Africa and India's demand for a broad waiver of intellectual property right protections to fight Covid-19 . The call comes as the WTO General Council is expected to discuss the issue this week and once again fail to come to any conclusion. In addition, the Biden administration is running out of money to support its global vaccination push in low- and middle-income countries, and negotiations with Congress on securing new funding have stalled. — Iowa Gov. Reynolds to deliver GOP SOTU response: Iowa GOP Gov. Kim Reynolds will get her national star turn next week, Republican leaders announced this afternoon. The conservative governor got the nod to deliver the GOP response to Biden's State of the Union on March 1, a choice that avoids snubbing any of Mitch McConnell or Kevin McCarthy's members. Reynolds is perhaps best known for her push to get students quickly back in schools and banning mask mandates in schools during the pandemic; she also sent Iowa law enforcement to the border and battled with Speaker Nancy Pelosi over a closely contested House race. — Africa CDC to ask world to pause Covid-19 vaccine donations: The Africa CDC will ask that all Covid-19 vaccine donations be paused until the third or fourth quarter of this year, the director of the agency told POLITICO . John Nkengasong, director of the Africa Centers for Disease Control and Prevention, said the primary challenge for vaccinating the continent is no longer supply shortages but logistics challenges and vaccine hesitancy — leading the agency and the African Vaccine Acquisition Trust to seek the delay.   DON'T MISS CONGRESS MINUTES: Need to follow the action on Capitol Hill blow-by-blow? Check out Minutes, POLITICO's new platform that delivers the latest exclusives, twists and much more in real time. Get it on your desktop or download the POLITICO mobile app for iOS or Android. CHECK OUT CONGRESS MINUTES HERE.     Nightly Number 3 The number of employees that left St. Luke Community Healthcare in Ronan, Montana, due to a federal Covid-19 vaccine requirement. Nearly two dozen rural hospital officials and state hospital association leaders told POLITICO they have lost just a fraction of their staff to the federal immunization requirement, which mandated that health care workers in every state except Texas received at least one shot of the vaccine by last week. Parting Words People walk through flower shops located in an underpass in Kyiv, Ukraine. | Pierre Crom/Getty Images CALM ON THE DNIEPER — Kyivans everywhere were glued to their screens Monday night, watching as Putin ordered his troops into eastern Ukraine. On the metro, late-evening commuters stared at their phones even more intently than usual, constantly refreshing the news. A wave of apprehension swept over the city: Here, at last, was Russia's invasion. But if someone was dropped into Kyiv this morning, they may not have realized it, Igor Kossov writes. The city appeared to have adopted the famous phrase of Britain under attack by Nazi Germany: "Keep Calm and Carry On." There were no fewer smiles and laughs on the faces of the many people walking on the streets. The roads struggled under the weight of their characteristic traffic problem, made worse by street markets, according to local news. In central Kyiv, buskers' melodies on keyboard or saxophone drifted through the windy, sunlit air. But if you speak the language — and are nosy — you can pick up on the subject from snatches of people's conversations, discussing President Volodymyr Zelensky, the international reaction to Putin's move or other adjacent topics. Before sending troops into Ukraine overnight, Putin had recognized the independence of two breakaway territories in the country's eastern Donbas region, a move Western leaders warned may serve as the pretext to attempt a full takeover of Ukraine. Yet despite worries, Ukrainians who spoke to POLITICO were resolute. Did someone forward this email to you? Sign up here.   Follow us on Twitter Chris Suellentrop @suellentrop Tyler Weyant @tweyant Renuka Rayasam @renurayasam Myah Ward @myahward   Follow us

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