Russia Shrugs Off Biden’s Sanctions as Putin Looks to Summit

Even as Russia vowed to retaliate for the latest raft of U.S. sanctions, the Kremlin signaled it was ready to limit the damage and remained open to the White House’s offer of a presidential summit.

“The sanctions were moderate and I hope the reaction will be,” said Andrey Kortunov, head of the Kremlin-founded Russian International Affairs Council. “Russia’s response shouldn’t hamper the summit. People understood that sanctions were inevitable.”

The latest moves are the most sweeping restrictions from the U.S. in several years, covering new issues of ruble-denominated government bonds, as well as a string of individuals and companies and the expulsion of 10 Russian diplomats. But they’re also calculated to limit the damage on an already-battered relationship. That’s something Moscow also seems eager to do, at least for now.

The new debt sanctions are the least painful option and probably won’t require the central bank to accelerate interest-rate increases to steady the markets, a senior Russian official said, speaking on condition of anonymity to discuss matters that aren’t public.

Tycoons Untouched

The debt limits announced Thursday, which take effect June 14, still allow investors to buy the bonds in the secondary market. The punitive measures didn’t extend to major Russian businesses or tycoons not already sanctioned, as some in Moscow had feared.

Investors seemed relieved, as the ruble and Russian bonds recovered some of their early losses by the end of the day in Moscow.

The U.S. said it acted in retaliation for alleged misconduct related to the Solarwinds hack and last year’s presidential election. President Joe Biden’s “goal is to provide a significant and credible response but not to escalate the situation,” National Security Advisor Jake Sullivan told CNN Thursday.

Biden, who warned President Vladimir Putin of the impending U.S. actions in a phone call Tuesday, wants to meet with the Russian leader to prevent relations between the two countries from deteriorating further, a U.S. official said. But if they do, the administration left open the possibility of expanding the debt sanctions, the official said.

Publicly, Russian officials responded angrily.

“This aggressive behavior will of course meet with a decisive rebuff,” Foreign Ministry spokeswoman Maria Zakharova said. “Washington must realize that they will have to pay the price of this deterioration in ties.”

Ukraine Tensions

Biden’s call to Putin had raised hopes the latest round of tensions over a huge Russian military buildup near the border with Ukraine might begin to ease. The U.S. and its allies have called on Moscow to pull back its troops, while the Kremlin blames Kyiv for escalating threats against Russian-backed separatists in the east of the country. Ukraine renewed calls for Russia to pull back Thursday.

Engineering the stabilization in the tattered relationship between the two former Cold War rivals is likely to be a challenge, though, given the broad range of flashpoints, from hacking and election meddling to the Kremlin’s pressuring of its neighbors and alleged poisoning of opponents.

“There is a desire to meet but the situation has severely deteriorated,” said Fyodor Lukyanov, head of the Council on Foreign and Defense Policy, which advises the Kremlin. “Imposing limits on our sovereign debt takes us to a new level.”

Putin may respond by ratcheting up tensions over Ukraine, dashing hopes of an immediate end to the crisis, according to the analyst. “When it will reach an extremely dangerous point, that’s when they will meet to avoid the worst-case scenario,” he said.

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