(Bloomberg) — President Joe Biden imposed stiff sanctions on Russia as Western nations warned that Kyiv could fall, with Ukraine’s foreign minister saying the capital was hit with “horrific” rocket strikes.
As Russian tanks, troops and aircraft pushed closer to Kyiv, Biden promised to inflict a “severe cost on the Russian economy” that will hamper its ability to do business in foreign currencies.
“This is a dangerous moment for all of Europe,” Biden said in an address to the nation from the White House, adding that the “next few weeks and months will be hard on the people of Ukraine.”
French President Emmanuel Macron said he had a frank, direct and quick conversation with Vladimir Putin at the request of Ukrainian leader Volodymyr Zelenskiy. Macron said Zelenskiy, who hasn’t been able to reach the Russian leader, wanted him to ask Putin to stop the fighting and engage in diplomacy.
“It didn’t produce any effect so far as you can see, because the Russian president has chosen war,” Macron said.
The Russian military effectively eliminated Ukraine’s air defenses and rapidly advanced across the neighboring country, meaning Kyiv could quickly be overrun as well, a senior Western intelligence official said. Zelenskiy said 137 soldiers have been killed so far, state-run Tass reported. Russia’s Defense Ministry on Thursday had said the strikes were targeting Ukrainian military infrastructure and didn’t pose a threat to the population.
After weeks of warnings that an attack would bring about a “massive” economic response, Biden announced that the U.S. would sanction Sberbank — Russia’s largest lender — and four other financial institutions that represent an estimated $1 trillion in assets, as well as a broad swath of Russian elites and their family members. Treasury said the penalties target “nearly 80 percent of all banking assets in Russia.”
“The sanctions we imposed exceed anything that’s ever been done,” Biden said. “The sanctions we imposed have generated two-thirds of the world joining us. They are profound sanctions.”
Biden also said action was needed now because Putin “has much larger ambitions than Ukraine.”
“He wants to reestablish the former Soviet Union,” Biden said. “His ambitions are completely contrary to the place where the rest of the world has arrived.”
In launching Russia’s most sweeping military action in decades, Putin has defied global condemnation and new rounds of sanctions. Putin has received support from China, the world’s second-largest economy, and threatened other countries that may interfere with his Ukraine offensive with historic consequences.
Even while the U.S. and allies including the U.K., Canada, Taiwan and Japan announced fresh sanctions, Biden made clear that they were not willing to sacrifice their own economies to inflict punishment on Putin. He said restrictions on currency clearing would include carve-outs for energy payments, a crucial source of revenue for Russia. Banning such sales would likely roil global energy markets and cause shortages in Europe.
To cushion the impact of the conflict and fresh sanctions on Americans, Biden said the U.S. will release additional barrels of oil from the U.S. Strategic Petroleum Reserve as conditions warrant. The U.S. already authorized the release of 50 million barrels of crude from the reserve last year, well before Russia’s invasion of Ukraine.
“I will do everything in my power to limit the pain the American people are feeling at the gas pump,” Biden said. “This is critical to me.”
Tech Curbs
U.S. stocks pared losses while the dollar and yen jumped and the euro and commodity-linked currencies retreated. Stocks climbed in Asia on Friday, while crude oil rose and U.S. equity futures slipped.
The U.S. will also implement export controls designed to cut Russia off from semiconductors and other advanced technology crucial to the military, biotechnology, and aerospace industries. Rules allow the U.S. to restrict exports to Russia from anywhere in the world using American technology, including software.
In a decision that may prompt criticism on Capitol Hill, Biden said Russia will not be barred from the Swift international banking network because Europe opposed that action. But the sanctions imposed Thursday against major Russian banks should have a similar effect and limit Russia’s ability to do business in dollars, euros, and pounds, he said.
Swift Split
Dutch Prime Minister Mark Rutte said many EU leaders have called for Russia to lose access to the international payment system, Swift.
“More work needs to be done to assess what it means if Russia is cut off from Swift,” Rutte said. “That really has to be worked through to make sure that we assess all eventualities what will happen.”
Russia’s largest state-owned enterprises also will be blocked from raising money from U.S. and European investors, Biden said.
Watch: Biden Says Putin Has ‘Larger Ambitions Than Ukraine’
“As a result of Putin’s war of choice, Russia will face immediate and intense pressure on its economy, and massive costs from its isolation from the global financial system, global trade, and cutting-edge technology,” the White House said in a statement after the president’s speech.
The latest round of sanctions follow the administration’s decision Wednesday to target the company that built the Nord Stream 2 gas pipeline from Russia to Germany. That came on top of other penalties announced Tuesday following Putin’s recognition of breakaway territories in the Donbas region of eastern Ukraine as independent states.
The U.S. leader said the slew of sanctions were a long-term tool to pressure Putin and were never expected to prevent an attack. The penalties will “take time,” adding “he’s going to test the resolve of the West to see if we stand together and we will.”
(Updates with Macron-Putin meeting, Ukraine foreign minister)
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