Biden officials assess options for sanctions against Russia after warnings of economic fallout and increased cyber risk to the United States and its allies

One of the concerns is that these negative effects could spill over to the United States in an election year, sources told CNN. But other members of the administration believe the severe sanctions being considered would have a manageable impact on the United States and would be worth imposing stiff sanctions on Russia.

The extent of the backlash would largely depend on the parameters of the sanctions and the suffering that Europe would suffer, said Jeff Schott, senior researcher at the Peterson Institute for International Economics which focuses on international trade policy and economic sanctions. .

“The problem with discussing these countermeasures is that if you take strong sanctions measures that have a big impact on the European economy, it will in turn bounce back on the US economy,” he said. .

The administration considered options including targeting major Russian commercial banks, sanctioning the Russian energy sector, blocking Russia’s access to bond markets, cutting Russia off from the international payment system SWIFT, and shutting down Russia’s access to bond markets. strengthening of export control measures.

One of the more “realistic” economic sanctions the United States and its allies could impose would be to kill the Russia-Germany Nord Stream 2 pipeline project, said Schott, which, when operational, will amount to around 10 to 15% of the European Union’s gas consumption, but will bypass Ukraine and be a major boon for Russia.

US officials have pressured Germany to pledge to kill the pipeline if Russia invades Ukraine, a senior US official said, and German Foreign Minister Annalena Baerbock said last month that ‘”in the event of further escalation” against Ukraine, “this pipeline could not come into operation.”

Officials are also aware of the possibility of Russian retaliation in cyberspace against critical US and European infrastructure.

The potential for such an overflow weighs on how the United States responds to any Russian incursion and will also affect the reaction of the Allies, as the United States strives to coordinate a response for maximum effect.

A senior administration official told CNN that “any costs we incur will be paltry compared to the impact we have on the Russian economy and financial system.”

“Whatever we decide, together with our allies and partners, is the right course for our collective interests and our security, we are prepared to bear significant costs for the Russian economy while minimizing unwanted fallout,” the Minister said. senior administration official at CNN.

A State Department spokesperson echoed the sentiment, telling CNN that while the department “did not anticipate potential sanctions actions,” the United States and its allies have consulted on “packages. specific consequences for Russia if they were to proceed with a military escalation in Ukraine. ”

“As Secretary Blinken said, if Russia chooses to step up, we will react quickly,” the spokesperson said.

Cyber ​​risks

Another scenario that worries US and EU officials is that Russia retaliates against any sanctions with hacking activity against Western critical infrastructure.

Recent National Security Council meetings have included discussions about Russia’s potential cyber activity if tensions with the United States escalate further over Ukraine, a senior administration official told CNN. Meanwhile, the White House has overseen federal agencies’ outreach to U.S. businesses by encouraging them to maintain strong cybersecurity protections, the official said.

“While there is currently no specific credible threat to the homeland of the United States, we are aware of the possibility that Russia may consider stepping up its destabilizing actions in a way that could impact further. others outside of Ukraine, “senior administration official Biden told CNN.

In mid-December, the Department of Energy held a non-confidential briefing with the largest US electricity, natural gas and oil companies on Russian history in Disruptive cyber operations in Ukraine and other parts of the world, two people who overheard the meeting told CNN.

While not linked to any specific threat, the Energy Ministry briefing covered technical details of previous Russian cyber attacks that cut power to parts of Ukraine in 2015 and 2016, as well as More recent Russian cyber activities such as the 2020 spy campaign that exploited SolarWinds software, said one of the people who attended the briefing, who spoke on condition of anonymity to describe a private call.

The message from US officials to electric utilities and energy operators on the call was to be vigilant and “be aware, as you monitor these geopolitical activities, that there may be spillovers” in the cyberspace, the source told CNN.

Jim Linn, executive director of DNG-ISAC, a cyberthreat sharing center for the downstream natural gas industry, told CNN: “The escalating tensions abroad, particularly in Eastern Europe , has the potential to change the cybersecurity landscape. “

Linn’s Threat Sharing Center, he added, “continuously monitors threats posted by members, government and law enforcement, and shares information and mitigation techniques.”

A recent classified briefing for major US financial institutions – hosted by the Treasury Department and US intelligence officials and part of their regular cyber threat briefings for banks – featured information on Russian cyber capabilities and the possibility of Russian retaliation in cyberspace if things escalate in Ukraine, a cybersecurity official at a major US bank familiar with the briefings told CNN.

“We are not backing down”

With all the risks to consider and Russia showing no sign of withdrawing its forces from the Ukrainian border, intensive discussions have been underway in recent days and weeks on how the United States and its allies can mitigate the damage. potential collateral, sources said.

“We do not shy away from our willingness to impose these kinds of severe sanctions if Russia decides to invade,” an official said. “But we still have to figure out how to do them in a smart way. How do you make them so that they affect the target party more than your allies?”

Sanctioning members of Putin’s inner circle is always a preferred option, the chief official said, and likely a given if Russia invades due to the more limited impact it would have on the international financial system.

The White House and senior officials are also discussing potential export control measures that could prevent Russia from importing smartphones, key aircraft and auto components, and materials from many other industries, threatening major impacts on Russian consumers, industrial operations and jobs, according to sources familiar with the discussions said.

Secretary of State Antony Blinken reiterated at a press conference on Wednesday that if Russia does not engage in “diplomacy and de-escalation” in next week’s talks and instead renews its aggression against Ukraine , the Kremlin will incur “massive consequences” on the part of the United States and its allies.

Biden conveyed much the same message to Putin in a phone call last week, telling the Russian leader that the costs of an invasion would include economic sanctions as well as “adjustments and increases in the position of the forces of NATO in the allied countries “and” additional assistance to Ukraine to enable it to better defend itself and its territory, “another senior administration official told reporters.