U.S. sanctions aimed at Russia may take a wide toll

WASHINGTON — The most punishing sanctions that U.S. officials have threatened to impose on Russia could cause severe inflation, a stock market crash and other forms of financial panic that would inflict pain on its people — from billionaires to government officials to middle-class families.

U.S. officials vow to unleash searing economic measures if Russia invades Ukraine, including sanctions on its largest banks and financial institutions, in ways that would inevitably affect daily life in Russia.

But the strategy comes with political and economic risks. No nation has tried to enact broad sanctions against such large financial institutions and on an economy the size of Russia’s. And the “swift and severe” response U.S. officials have promised could roil major economies and threaten the stability of the global financial system, analysts say.

Some analysts warn of a potential escalatory spiral. Russia might retaliate against an economic gut punch by cutting off natural gas shipments to Europe or by mounting cyberattacks against American and European infrastructure.

The pain caused by the sanctions could foment popular anger against Russian President Vladimir Putin. But history shows that the country does not capitulate easily, and resilience is an important part of its national identity. U.S. officials are also sensitive to the notion that they could be viewed as punishing the Russian people — a perception that might fuel anti-Americanism and Putin’s narrative that his country is being persecuted by the West.

Although the Biden administration and its European allies are trying to deter Putin with tough talk, some experts question whether they would follow through on the most drastic economic measures if Russian troops breached the border and moved toward Kyiv, Ukraine’s capital.

President Joe Biden has said he will not send U.S. troops to defend Ukraine. Instead, U.S. officials are trying to devise a sanctions response that would land a damaging blow against Russia while limiting the economic shock waves around the world — including in the United States.

Many experts on sanctions believe that the boldest sanctions against Russia’s financial industry, if enacted, could take a meaningful toll.

“If the Biden administration follows through on its threat to sanction major Russian banks, that will reverberate across the entire Russian economy,” said Edward Fishman, who served as the top official for Russia and Europe in the State Department’s Office of Economic Sanctions Policy and Implementation during the Obama administration. “It will definitely affect everyday Russians.”