Editor’s Note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our s each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro. After promising a full buffet of meaty sanctions for Vladimir Putin should Russia escalate its confrontation with Ukraine, President Joe Biden on Tuesday gave us just the first course. But White House officials insisted there is much more on the menu. The appetizers: Sanctions on three Russian oligarchs with close ties to Putin. “Full blocking” sanctions on two major Russian banks. Restrictions on Russia’s sovereign debt that the White House says will cut off its ability to secure Western financing for government operations. And finally, a halt by Germany to the Nord Stream 2 undersea pipeline, an effort that Biden said the U.S. is working with Berlin to coordinate. Perhaps just as significant as what they did is how they did it — in close alignment with U.S. allies in Europe. Biden also announced the U.S. would move American forces into the Baltic region to reassure NATO allies and hopefully deter further Russian aggression. “This was a strong first move by the Biden administration,” said Daniel Tannebaum, a partner at Oliver Wyman and the firm’s global head of sanctions. “The administration did a nice job of weaving in the sovereign debt, banking and oligarch sanctions, while still leaving their powder dry on additional banks [and] export controls.” “The sanctions we’re talking about in general are much more significant than what we saw in 2014” after Russia invaded Crimea, he added. What’s the next course? Deputy National Security Adviser Daleep Singh told reporters at a White House briefing, “This is only the sharp edge of the pain we can inflict.” The blunt force could come later: The administration plans to take steps to block Russia’s access to critical technologies through new export controls if Putin escalates his invasion, a senior administration official said. Our Steven Overly writes: “Imposing export controls would be similar to today’s financial penalties in that the Biden administration would be ‘denying something to Russia that they need and they can't replace from anywhere else or produce at home,’ the official said.” It’s still not clear what technologies would be targeted or how broadly the export controls would be applied. But the administration is widely expected to cut off Russia’s access to high-end microchips, which are vital to a broad range of electronics, from smartphones and computers to medical and defense equipment, Steven reports. “While the U.S. does not currently produce such advanced semiconductors, most are made with the help of American software and contain components designed or manufactured by American companies.” Jeffrey Schott, a senior fellow at the Peterson Institute and a sanctions expert, said export controls would probably be the most effective tool U.S. officials could use against Russia. “The severe sanctions are still on the shelf and are being held in abeyance in hopes that Putin will deescalate,” Schott said. Why not more now? Singh was pressed at the White House briefing to explain why the administration held back at all, and why officials think the threat of further sanctions will deter an escalation. He said the job of U.S. officials is to manage risks and impose consequences. They can do that by issuing further financial sanctions and export controls, by fortifying NATO’s eastern flank, by providing defensive assistance to Ukraine and by preparing energy markets for the potential impact of Russia’s actions, he said. Singh also laid out the administration’s sanctions principles:
- They need to be powerful enough to demonstrate our resolve and have the capacity to impose overwhelming costs;
- They should be calibrated such that we can maximize coordination with our allies and partners;
- They should maintain flexibility, so we can escalate or deescalate, depending on what Putin does;
- They should be responsible so that we avoid unwanted spillovers to the U.S. and global economies;
- They need to be sustainable. They work over time, not on day one.
What about U.S. consumers and businesses? Biden said the administration will use every tool it can to keep energy costs for American consumers and businesses from spiking. Singh offered few details about those plans, calling it an ongoing effort, but hinted at coordinated action with major energy producers. “We all have reserves at our disposal, and those reserves could help support the supply of energy worldwide,” he said. He also said the administration is working with major energy producers, several of whom have the spare capacity to supply global energy markets in the event of any disruption. He also said the administration could work with energy companies to surge their capacity to supply energy to the market, particularly as prices rise. IT’S WEDNESDAY — In other exciting money news, U.S. Soccer agreed to a $24 million settlement with players from the U.S. women’s national team over their class-action equal pay lawsuit. "There's no real justice in this other than this never happening again," midfielder Megan Rapinoe told ESPN Tuesday. Have sanctions tips, equal-pay takes or other story ideas for us? Email us at kdavidson@politico.com, aweaver@politico.com or find us on Twitter @katedavidson or @aubreeeweaver.
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