US to announce new sanctions package against Russia on Wednesday

By Phil Mattingly, Kaitlan Collins, Sam Fossum and Sean Lyngaas, CNN

The United States will announce new sanctions against Russia on Wednesday in coordination with the G7 and the European Union, according to an administration official.

The official said the broad set of measures “will impose significant costs on Russia and send it further down the path of economic, financial and technological isolation.”

The new sanctions package will ban new investment in Russia, increase sanctions against financial institutions and state-owned companies in Russia, and punish Russian government officials and their family members.

A Western official familiar with the plans said the United States could apply sanctions to Russian President Vladimir Putin’s adult children – he acknowledged two daughters – as early as Wednesday. The Biden administration is also considering extending sanctions against Sberbank, Russia’s largest financial institution, and Alfa Bank, another major lender, the official said.

The new sanctions package will mark the latest escalation in efforts by the United States and its allies to impose costs on Russia for its invasion and, over time, cut off critical economic sectors that the country uses to wage war in Classes. They also follow new revelations of new atrocities committed by Russian forces in northern Ukraine, with footage of the atrocities committed in Bucha serving as an accelerator for ongoing talks between the United States and its European allies to increase economic costs, officials said.

“These measures will degrade key instruments of Russian state power, inflict acute and immediate economic harm on Russia, and hold accountable the Russian kleptocracy that funds and supports Putin’s war,” the administration official said. “These actions will be taken in close cooperation with our allies and partners, demonstrating our determination and unity to impose unprecedented costs on Russia for its war against Ukraine.”

The official added: “We had already concluded that Russia had committed war crimes in Ukraine, and Bucha’s information appears to show further evidence of war crimes. And as the President said, we will work with the world to ensure that these crimes are held fully accountable. One of those tools is sanctions – and we have worked intensively with our European allies on new sanctions.

The expected sanctions come after the US Treasury announced it would no longer allow Russia to repay its debt in dollars stored in US banks. While Washington had imposed sanctions on the Russian Central Bank freezing their foreign currencies in US banks, the Treasury Department had previously allowed Russia to use those reserves to pay down its debt.

It’s a move that officials say will significantly increase default risk and undermine the central bank’s urgent efforts to stem the economic haemorrhage that immediately brought Russia’s economy to a halt following the Western response to the invasion.

Since Russia began its invasion of Ukraine in late February, the United States and its allies have sanctioned hundreds of Russian elites and lawmakers, restricted the country’s access to Western technology important to its sectors defense and technology, froze about half of Russia’s foreign reserves and cut specific Russian banks from the SWIFT banking network, among other measures. The United States has also banned the import of oil, natural gas and other Russian energy products.

Although the severity and speed of Western sanctions against Russia have been unprecedented, key exclusions remain as US officials continue to monitor US and European supply chains and attempt to limit the impact of sanctions on economies. Western countries grappling with record levels of inflation. .

CNN reported late last week that Russia was facing a deep recession and high inflation as sanctions pushed the country into an increasingly closed economy, a change U.S. officials believe the world will face. The Kremlin will struggle because it has long relied on selling raw materials to buy sophisticated equipment and consumer goods.

Sanctions ‘will take time’ to ‘crush’ Russian economy

While the United States and its allies have imposed the most sweeping sanctions regime in history against a country the size of Russia, officials concede it has done little to alter the calculus. of Putin.

The threat of sanctions has not deterred the invasion itself, and the accumulation of economic sanctions has not brought Russia any closer to a withdrawal or a since-negotiated settlement.

Yet the administration’s sanctions policy, which is spearheaded by a host of veterans involved in the response to Russia’s latest incursion into Ukraine in 2014, is calibrated to cut critical components of the Russian economy over time and , perhaps more importantly, in a unified context. and multilateral.

The general intention to maintain unity with more than 30 countries on four continents that have joined the sanctions has limited their reach on the central engine of the Russian economy: energy.

EU members’ dependence on Russian oil and gas has limited the scope of sanctions targeting the energy sector, even as the United States unilaterally decided to ban imports of Russian oil. It has also created pressure to deal with rising energy prices around the world, which could create national tensions that would undermine what has been a unified front so far.

Yet the brazen nature of Russia’s attack has significantly altered the willingness of some European leaders to sign sweeping economic sanctions. The EU now plans to ban Russian coal imports and, despite some continued resistance, the move to extend an oil and gas embargo has continued to gain momentum, officials said.

Yet despite all the focus on the immediate impact on sanctions, officials stress that key elements of their efforts are having the most effect as the conflict drags on. Export controls targeting critical economic sectors are designed to cut off access to technology needed by Russia’s industrial base to continue production in defence, aerospace and biotechnology.

Central bank sanctions will, over time, systematically undo years of Russian efforts to insulate its economy through foreign exchange reserves that are now either frozen or must be urgently tapped to avoid a impending default.

The extension of individual sanctions beyond key Russian officials and financiers to also include family members is intended to cut off key avenues to protect wealth from further sanctions.

“It will take time to grind the elements of Russian power within the Russian economy, to hit their industrial base hard, to hit the revenue streams that sustained this war and sustained the … kleptocracy in Russia,” Jake Sullivan, Biden’s national security adviser, told reporters on Monday. “But there’s no better time than now to work on it so that the costs eventually settle in and it ends up narrowing down Russia’s choices.”

US sanctions Russia’s ‘largest’ dark web market

The US Treasury Department on Tuesday sanctioned what it called Russia’s “largest” dark web market, a place where cybercriminals sold hacking tools and millions of dollars in ransomware payments changed hands. hands.

The sanctions coincided with a decision by German police to shut down the computer servers of Hydra, as the dark web market is known, and seize $25 million in cryptocurrency.

The Justice Ministry also announced on Tuesday criminal charges against Dmitry Olegovich Pavlov, a 30-year-old Russian resident, for drug trafficking and money laundering conspiracy in connection with his alleged role in running Hydra’s computer servers. .

Since its emergence in 2015, Hydra’s dark web market – an internet network accessible through specialized software – has been a haven for illicit trade, according to US researchers and officials. More than $5 billion in Bitcoin transactions have taken place on Hydra, according to Elliptic, a company that tracks cryptocurrency.

This includes approximately $8 million in ransom payments made to hackers who deployed three major strains of ransomware in attacks on US businesses.

“The global threat of cybercrime and ransomware originating in Russia, and the ability of criminal leaders there to operate with impunity, is of deep concern to the United States,” Treasury Secretary Janet Yellen said in a statement.

After a series of ransomware attacks on US critical infrastructure last year, the Biden administration sought to stifle sources of funding for cybercriminal gangs. The Treasury Department in September sanctioned Suex, a cryptocurrency exchange that US officials have accused of doing business with hackers behind eight types of ransomware.

This story was updated with additional reports on Tuesday.

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CNN’s Kevin Liptak contributed to this report.