Wednesday, February 23, 2022

Decoding the West’s sanctions plan

From the SitRoom to the E-Ring, the inside scoop on defense, national security and foreign policy.
Feb 23, 2022 View in browser
 
POLITICO's National Security Daily newsletter logo

By Alexander Ward and Quint Forgey

Daleep Singh, deputy national security advisor for international economics, speaks with reporters at the White House.

Daleep Singh, deputy national security advisor for international economics, speaks with reporters at the White House, Tuesday, Feb. 22, 2022, in Washington. | Alex Brandon/AP Photo

With help from Cristina Gallardo and Daniel Lippman

Send tips | Subscribe here | Email Alex | Email Quint

With their sanctions announcements over the last 24 hours, the U.S. and its allies all but revealed their Russia strategy: Each advance into Ukraine will trigger a larger response in the hopes of deterring VLADIMIR PUTIN from pushing any further.

That plan will likely be put to the test soon. Western officials say Russian forces are in the Donbas and have the eastern city of Kharkiv — home to 1 million people — in the crosshairs. Mariupol is also assumed to be on the Kremlin's attack list. An advance on either, or both, would mean that Putin has sent his troops well outside the line of contact, and beyond the Donbas, indicating that the larger invasion of Ukraine has fully begun.

A European diplomat in the U.K. told our own CRISTINA GALLARDO that Russian forces operating outside the Donbas would trigger the next round of sanctions, which another European official confirmed to NatSec Daily shortly thereafter. Beyond that, though, it's unclear what lines Russia must cross to earn more financial reprimands and from whom.

The National Security Council held a call with top lawmakers from both chambers on Tuesday at 6:30 p.m., in which administration officials refused to outline for members what would trigger a more forceful sanctions response. (The NSC didn't respond to a request for comment.)

In fairness, no Russia-opposed government is explicitly delineating their sanctions game plan just yet. A senior British official summed up the rationale for such secrecy: "Setting out specific trigger points for future sanctions would give President Putin a strategic advantage and undermine our ability to deter further invasion."

The Kremlin boss, however, seems unlikely to be deterred, so we thought it'd be a useful exercise to get a sense of what sanctions the U.S. is likely to impose along with allies, area by area.

A senior administration official offered the first clue in a call with reporters shortly after President JOE BIDEN announced the first set of sanctions on sovereign debt and one Russian bank Tuesday afternoon. "No Russian financial institution is safe if this invasion proceeds. We are ready to press a button to take further action on the very largest Russian financial institutions, including Sperbank and VTB, which collectively hold almost $750 billion in assets — or more than half the total in Russia as a whole," the official said.

DANIEL FRIED , the State Department's sanctions coordinator in 2014 when Russia seized Crimea, called that "the heavy hammer."

"If you hit those, you've hit a lot," Fried, now at the Atlantic Council in Washington, D.C., told NatSec Daily.

Industry would also get hit by the U.S., said JOHN SMITH, a former director of the Treasury Department's Office of Foreign Assets Control, especially Russia's conglomerates.

We're told the U.S. will additionally approve some export controls. One of the biggest moves would include targeting semiconductors using the Foreign Direct Product Rule — which stops semiconductors made with U.S. parts or IP, for example, from export to Russia — and other technologies.

"If he chooses to invade what we're telling him very directly is that we're going to cut that off, we're going to cut him off from Western technology that's critical to advancing his military, cut him off from Western financial resources that will be critical to feeding his economy and also to enriching himself," Deputy Treasury Secretary WALLY ADEYEMO told CNBC today.

The West has sanctioned a few oligarchs already, but will also hit top members of Putin's clique before targeting the president directly. The European Union is set to sanction Russian Defense Minister SERGEI SHOIGU along with more than 20 other top regime officials, per a document seen by POLITICO's JACOPO BARIGAZZI.

Important energy interests and firms are certainly on the sanctions shortlist, experts say. The White House today once again allowed for sanctions on the Russian company that built the controversial Nord Stream 2 natural gas pipeline, receiving praise from lawmakers, including Democrats, who long pushed Biden to do this.

The "nuclear option," per Fried, would be fully sanctioning the Central Bank of Russia . It's a major step the Treasury Department doesn't like to take because it punishes the entirety of a nation's economy, though the Trump administration sanctioned Iran's central bank three years ago.

If the Central Bank is cut off completely from the U.S. dollar, "you are stopping everything," said Smith, who's now a partner at Morrison and Foerster. "You've effectively declared economic war over Putin's military war."

Fried said despite the mythology surrounding it, kicking Russia out of SWIFT won't matter much because it's mainly a secure messaging system. While it'd be inconvenient, Moscow could find other means — like fax machines — to send its trading messages around the world. "There are workarounds," he said.

The sanctions are readied, and the only person who will ultimately decide if they're imposed is the man who started this war. "The best way for Putin to avoid further sanctions and complete isolation from the international system is to withdraw his troops and his threats," the British official said.

If he doesn't, "we are ready to go super fast and harder," said a European official.

 

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The Inbox

UKRAINE TO IMPOSE STATE OF EMERGENCY: OLEKSIY DANILOV, secretary of Ukraine's National Security and Defense Council, has called for a nationwide state of emergency that would remain in effect for 30 days, with the option to be extended for another 30 days, Quint writes. Ukraine's parliament must vote to enact the measure.

"Depending on the threats that may arise in certain territories, there will be either a more strengthened or more weakened state of emergency," Danilov said at a news briefing in Kyiv. He specifically mentioned areas along Ukraine's border with Russia, as well as its border with Belarus — where Russia has prolonged its joint military exercises.

The proposed state of emergency would apply to all of Ukraine, with the exception of the breakaway Donetsk and Luhansk regions in the country's east, which Russia formally recognized as independent republics Monday. A state of emergency has already existed in those areas — collectively known as the Donbas region — since 2014.

The state of emergency measure is the latest step Ukrainian officials have taken in recent days in response to Russia's aggression. Ukrainian President VOLODYMYR ZELENSKYY ordered the mobilization of reservists Tuesday, and the military has begun the conscription of those aged 18 to 60 for a maximum period of one year. Zelenskyy ruled out a general mobilization of civilians, however, and Danilov said the government had not yet decided to impose martial law.

A senior Pentagon official told reporters today that 80 percent of Russia's 190,000 forces are " literally ready to go now, if they get the order to go" — signaling that a full-scale invasion could be imminent.

UKRAINE GOV SAYS OFFICIAL WEBSITES CYBERATTACKED: Several Ukrainian websites were taken offline Wednesday — and it appears another cyberattack is to blame.

NatSec Daily reached out to a top Ukrainian official who simply responded "yes" when we asked if the websites were down because of a cyberattack. It was still too early to attribute the suspected distributed denial of service strike on any particular country, though Russia was labeled as the culprit of a cyberattack on Ukrainian government websites just last week.

MYKHAILO FEDOROV, Ukraine's minister of digital transformation, later confirmed the DDoS attack on his nation's official sites.

Analysts have long suspected that a barrage of cyberstrikes would precede Russia's broader physical invasion of Ukraine. The European Union on Monday mobilized a 10-person cybersecurity team to help Ukraine defend itself online.

STATE LEAVES AFGHAN DIPLOMATS IN LURCH: ABDUL HADI NEJRABI, the Afghan embassy's former deputy chief of mission in Washington, D.C., says the State Department asked diplomats from Afghanistan's ousted government to shut down their embassy and consulates in the United States in an early February letter, giving them 30 days to wind down operations, per our own DANIEL LIPPMAN.

The State Department's order poses a problem, Nejrabi explains, in part because there are tens of thousands of Afghans who have fled to the United States since the Taliban retook power last August — and they need consular services such as birth certificates and passports, which they may not be able to access if the country's remaining diplomats leave.

Nejrabi says embassy staff have asked the State Department to let them continue to work, and to compensate Afghanistan's diplomats-in-exile so that they can "avoid becoming homeless." Their U.S. bank accounts have been frozen for months, leaving the ousted diplomats in a financial quagmire.

Nejrabi said the embassy sent letters to the State Department in November, December and January asking for State to speak to Treasury and allow them to access roughly $1.5 million they have in frozen accounts. In mid-February, The New York Times reported that "U.S. officials have tried, unsuccessfully, to assure Citibank that it would not be penalized if the Afghan funds were unlocked."

Asked for comment, a State Department spokesperson said: "We are in consultations with the missions concerning their status given financial constraints they are facing, but there has been no change in the status of the Afghan mission or its personnel at this time."

TREASURY SANCTIONS HOUTHI FINANCE NETWORK: Continuing today's sanctions trend, the Treasury Department announced that it was designating members of an international financial network funding the Houthis in Yemen.

"Led by the U.S.-designated Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF) and Houthi financier Sa'id al-Jamal, this network has transferred tens of millions of dollars to Yemen via a complex international network of intermediaries in support of the Houthis' attacks," read a news release. "Today's action is taken in close coordination and collaboration with regional Gulf partners."

"All property and interests in property, subject to U.S. jurisdiction of the persons designated, are blocked, and U.S. persons are generally prohibited from engaging in transactions with the designated persons or their blocked property," the release continued.

The Biden administration is still weighing whether to redesignate the Houthis as a foreign terrorist organization. Humanitarian organizations are pushing the administration not to do so, despite the Houthis' recent ballistic missile attacks on the United Arab Emirates, because they fear curbing the flow of aid will exacerbate one of the world's worst humanitarian crises.

"Despite persistent calls for peace from the international community, the Houthis continue their destructive campaign inside and outside of Yemen. Houthi leaders must cease their campaign of violence and negotiate in good faith without preconditions to end the conflict," Secretary of State ANTONY BLINKEN said in a statement.

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IT'S WEDNESDAY: Thanks for tuning in to NatSec Daily. This space is reserved for the top U.S. and foreign officials, the lawmakers, the lobbyists, the experts and the people like you who care about how the natsec sausage gets made. Aim your tips and comments at award@politico.com and qforgey@politico.com, and follow us on Twitter at @alexbward and @QuintForgey.

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Listen to the recording of POLITICO's Twitter Spaces event on Russia-Ukraine today which featured Alex and NatSec Daily editor John Yearwood.

Flashpoints

TIGRAYAN U.N. PEACEKEEPERS FEAR ETHIOPIA RETURN: Hundreds of ethnic Tigrayan U.N. peacekeepers fear their return to Ethiopia where they could face forced detentions, The Associated Press' CARA ANNA reported.

"Two Tigrayan peacekeepers told the AP that they and hundreds of colleagues have ended their U.N. peacekeeping stint in Abyei, a region contested by Sudan and South Sudan, and are now expected to return to Ethiopia. They asserted that their peacekeeping camp is under Ethiopian control and U.N. personnel are not allowed access," Anna wrote. "Sgt. ANGESOM GEBRU , who slipped away from the camp with a few dozen others, said the remaining Tigrayan peacekeepers can only walk away safely once they are taken to a local airport for flights back to Ethiopia, which began this week. But as Tigrayans refuse to board them, he said, there are fears that those still in the peacekeeping camp could face retaliation."

"The two peacekeepers told the AP that Ethiopian authorities at the camp told the Tigrayans they would not be harmed if they returned home. But they said they weren't reassured, and they and colleagues who left the camp are sheltering with newly arrived peacekeepers from Ghana," Anna also noted.

Tigray's 6 million people largely have been blockaded since June last year as the fighting flared between rebels and government forces. Earlier this month, Africa's top human rights body accused Addis Ababa of mass killings, sexual violence and deliberate civilian targeting.

Keystrokes

UKRAINE READIES DATA TRANSFER FROM KYIV: VICTOR ZHORA , the deputy chief of Ukraine's State Service of Special Communications and Information Protection, revealed that the nation's government is getting ready to wipe its computer servers and transfer its sensitive data out of Kyiv should Russian troops try to seize the capital city, per our own ERIC GELLER (for Pros!).

If Russia acquires government passwords during its invasion, Ukrainian agencies' cyber teams have orders to "quickly cut off access to these compromised accounts," Zhora said in an interview. But Moscow will find "no sensitive data" on government workers' computers, he contended, because all of it is stored on central systems in Kyiv, and the government has developed plans to disable that infrastructure and transfer backed-up data to fallback positions if necessary.

The preparations by Ukrainian officials are the result of "an unintended consequence of a security measure the government took in 2014, when it began centralizing its computer systems after Russia and pro-Moscow separatists seized control of Crimea and the Donbas region," Geller explains.

That measure "made it harder for Russian hackers to penetrate computers that store critical data and provide services such as pension benefits, or to use formerly government-run networks in the occupied territories to launch cyberattacks on Kyiv," Geller writes. But it also "created a tempting target in the capital for Russia's military."

EUROPEANS TO TARGET RUSSIAN 'TROLL FACTORY': St. Petersburg's infamous "troll factory" is among more than 20 people and entities set to face sanctions from the European Union as part of a broad set of measures by the bloc designed to deter Russia from pursuing further aggression in eastern Ukraine, per POLITICO Europe's SAMUEL STOLTON and Barigazzi (for Pros!).

According to a draft document, the Internet Research Agency "conducts disinformation campaigns targeting Ukraine's agenda by influencing elections or perceptions of the annexation of Crimea or the conflict in Donbas."

The organization — which is bankrolled by YEVGENY PRIGOZHIN , head of the Russian paramilitary outfit the Wagner Group — also "is responsible for actively supporting actions which undermine and threaten the territorial integrity, sovereignty and independence of Ukraine," the document states. The EU sanctions package is expected to be finalized later today.

 

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The Complex

PENTAGON GREENLIGHTS GUARD DEPLOYMENT TO D.C.: Defense Secretary LLOYD AUSTIN has approved a request from the District of Columbia government and the U.S. Capitol Police to deploy 700 unarmed National Guard troops to the nation's capital ahead of planned protests by trucker convoys next week, per The Associated Press' ASHRAF KHALIL and LOLITA C. BALDOR.

The Pentagon said the troops would be used to assist with traffic control during the demonstrations against mask mandates, vaccine requirements and other coronavirus-related rules — with 400 Guard members coming from the District of Columbia Guard and another 300 sent from other states. The troops will not carry firearms or participate in law enforcement or domestic-surveillance activities.

The convoys expected to arrive in Washington "follow the recent Canadian truckers' protest which shut down the busiest U.S. Canadian border crossing and besieged the streets of the capital, Ottawa, for weeks to protest government pandemic restrictions," according to the AP. "The multiple blockades were broken up by police last week, with more than 100 arrests."

On the Hill

CRUZ LIFTS HOLDS: Now that the administration is lifting sanctions waivers on the Nord Stream 2 pipeline, Sen. TED CRUZ (R-Texas) has ended his blocks on Biden's national security nominees.

"President Biden made the right decision," he said in a statement.

Thus ends one of the most bitter battles in Washington. After Biden announced the U.S. would lift sanctions on the nearly completed pipeline in a deal with Germany last year, Cruz went to war, blocking many of Biden's nominees for key State Department positions. That led to months of wrangling between that office, the White House and State. Cruz continuously promised to lift the holds if Biden lifted the waivers.

Now that Biden has, Cruz followed through on his promise.

"Better late than never," Cruz told us in a brief phone call. Now he wants Congress to pass his bill permanently stripping the sanctions waiver when lawmakers return to Washington, he said.

GOP SPLIT OVER RUSSIA-UKRAINE: Factions within the Republican party are fighting over how much to care about the Russia-Ukraine crisis.

"The majority of congressional Republicans are backing Biden's vow to impose crushing sanctions on Russia after its troops entered eastern Ukraine on Tuesday. Some have even praised Biden's moves, like the deployment of additional U.S. troops to Eastern Europe to boost NATO's defenses," wrote our own ANDREW DESIDERIO, TARA PALMERI and MERIDITH McGRAW. "But a vocal GOP minority on and off Capitol Hill — represented by Sen. JOSH HAWLEY (R-Mo.), Fox News host TUCKER CARLSON and Ohio Senate candidate J.D. VANCE , among others — has taken a third path, actively arguing against any U.S. involvement in the region while still dinging Biden. They argue that expanding the U.S. commitment to NATO is a mistake, and that the president should instead focus on countering China and securing America's southern border."

Meanwhile, former President DONALD TRUMP has told people in his inner circle that Putin shouldn't be allowed to take Ukraine and that the invasion wouldn't have happened if he were still in charge.

The earliest conclusion is that Republicans will struggle to coalesce around a consistent message like they could during last year's Afghanistan withdrawal or even when Russia seized Crimea in 2014.

Broadsides

REPUBLICANS SAY FIRST RUSSIA SANCTIONS INSUFFICIENT: Our colleagues at POLITICO Playbook used their morning edition to highlight Republicans' first-blush reactions to President JOE BIDEN's sanctions announcement in a White House address Tuesday. The GOP's general consensus? "Too little, too late," said Sen. BEN SASSE (R-Neb.).

"President Biden promised a 'swift and severe' response," said former U.S. Ambassador to the United Nations NIKKI HALEY . "He did not deliver. Ukraine is a test of Western resolve. It's not just about Putin. The Chinese communists and Iranian jihadists are watching too. It's a major leadership moment for Biden. So far, he's failing."

The Wall Street Journal's LINDSAY WISE also rounded up some of the Republican responses: "I mean, at least it's a step in the right direction. I wouldn't even call it a half measure though. It's probably more like a quarter measure: sanctions on a couple things and some oligarchs," said Sen. TOM COTTON (R-Ark.).

"The world is taking note of what America does in this moment, and the president's remarks, and the administration's response thus far, do not meet the moment," said Sen. JONI ERNST (R-Iowa).

But Ukrainian Foreign Minister DMYTRO KULEBA , speaking alongside SecState Blinken, seemed pleased with the U.S. penalties: "We do appreciate … the sanctions which were announced today. They target Russia. They're very specific. They are painful.… [T]his strategy of imposing sanctions by waves, if I may put it this way, is something that can work if it continues … in a sustainable way."

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Transitions

— DAVID ASHER, THOMAS DINANNO and JERRY MCGINN are joining Menlo Micro's operations team in Washington, D.C. Asher, who currently is a senior fellow at the Hudson Institute, will be director of federal business development. DiNanno, who currently is an adjunct fellow at the Hudson Institute, will be a senior adviser for national security. McGinn, who currently is the executive director of the Center for Government Contracting at George Mason University's School of Business, will be a strategic adviser of U.S. government operations.

— LEO CRUZ is now senior adviser to the assistant secretary of the Navy for research development and acquisition. He most recently was special assistant to the undersecretary of the Navy.

What to Read

— NOAH ROTHMAN, Commentary: "If We Are Serious About Russia, We Must Prepare for Pain"

— ALINA POLYAKOVA and DANIEL FRIED, Foreign Affairs: "Putin's Long Game in Ukraine"

— MICHAEL BRENDAN DOUGHERTY, National Review: "The Best-Laid Plans for Deterring Russia"

Tomorrow Today

— The German Marshall Fund of the United States, 9 a.m.: "The Russia-Ukraine Crisis and Turkey's Balancing Act — with GALIP DALAY, LIANA FIX, JONATHAN KATZ and MARYNA VOROTNYUK"

— The Intelligence and National Security Alliance, 9 a.m.: "Coffee and Conversation with SUSAN POLLMANN — with LARRY HANAUER"

— Washington Post Live, 9 a.m.: "World Stage: Crisis in Ukraine with Lithuania Prime Minister INGRIDA SIMONYTE — with DAVID IGNATIUS"

— The Arab Center, 10 a.m.: " The Deteriorating Humanitarian Crisis in Syria: Is There an End in Sight? — with LINA SERGIE ATTAR, MAZEN KEWARA, KARAM SHAAR and MONA YACOUBIAN"

— Varonis Systems, 12 p.m.: "The Hackers and the CISO: Mindset, Methods and Mayhem — with ED AMOROSO, DAVIN JACKSON and RACHEL TOBAC"

— The Federal Communications Bar Association, 1 p.m.: "Cybersecurity Tips and Tricks for the General Counsel — with MATT DIAZ, PAUL KAY, MARC J. KRASNEY, VIN PALADINI, ELIZABETH A. ROGERS and more"

— The National Defense Industrial Association, 1 p.m.: "Enabling the Joint Warfight: Joint All Domain Command and Control — with ALAN SHAFFER, RICHARD STAPP and MICHAEL ZATMAN"

— The Potomac Officers Club, 1 p.m.: " How Climate Policy Can Drive Change — with STEVE AMBROSE, WIL BURNS, PARI KASOTIA, JOSEPH MAJKUT and MICHAEL MCGHEE"

— The Atlantic Council, 2 p.m.: "Global Challenges and the Army's Role: A Conversation with Secretary of the U.S. Army CHRISTINE WORMUTH — with MICHAEL ANDERSSON, JANE HOLL LUTE and VIVIAN SALAMA"

— The National Park Service, 2 p.m.: "Cold War Advisory Committee Meeting"

— The Center for Strategic and International Studies, 3 p.m.: " What's Next for the U.N. Assistance Mission in Afghanistan? — with MARK BOWDEN, JAMES CUNNINGHAM and NILOFAR SAKHI"

— Washington Post Live, 3 p.m.: " World Stage: Crisis in Ukraine with Dame KAREN PIERCE, British Ambassador to the United States"

 

STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president's ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today.

 
 

Have a natsec-centric event coming up? Transitioning to a new defense-adjacent or foreign policy-focused gig? Shoot us an email at award@politico.com or qforgey@politico.com to be featured in the next edition of the newsletter.

And thanks to our editor, Ben Pauker, who plans to join the D.C. truckers on a nice, responsible drive on the Beltway.

 

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