One concern is that those negative effects could boomerang back onto the US during an election year, sources told CNN. But others in the administration believe the tough sanctions being weighed would have a manageable impact on the US, and would be worth it to impose severe penalties on Russia.
The extent of the blowback would depend largely on the parameters of the sanctions and how much Europe would suffer, said Jeff Schott, a senior fellow at the Peterson Institute for International Economics who focuses on international trade policy and economic sanctions.
“The problem with discussing these countermeasures is that if you take a strong sanctions action that has a big impact on the European economy, that will in turn rebound to the US economy,” he said.
The administration has been considering options including targeting major Russian commercial banks, sanctioning Russia’s energy sector, blocking Russia’s access to bond markets, cutting Russia off from the SWIFT international payment system, and tightening export control measures.
Among the most “realistic” economic penalties that the US and its allies could impose would be to kill the Russia-to-Germany gas pipeline project Nord Stream 2, Schott said, which — when operational — will account for about 10-15% of European Union gas consumption but will bypass Ukraine and be a major boon to Russia.
US officials have been lobbying Germany to commit to killing the pipeline if Russia invades Ukraine, according to a senior US official, and Germany’s Foreign Minister Annalena Baerbock said last month that “in the event of further escalation” against Ukraine, “this gas pipeline could not come into service.”
Officials are also mindful of the possibility of Russian retaliation in cyberspace against US and European critical infrastructure.
The potential for such spillover is weighing on how the US responds to any Russian incursion and will also affect how allies react, as the US works to coordinate a response for maximum effect.
A senior administration official told CNN that “any costs that we would bear will pale in comparison to the impact we generate on the Russian economy and financial system.”
“Whatever we decide, in concert with our allies and partners, is the right course for our collective interests and security, we are prepared to deliver severe costs to the Russian economy while minimizing unwanted spillover,” the senior administration official told CNN.
A State Department spokesperson echoed that sentiment, telling CNN that while the department does “not preview potential sanctions actions,” the US and its allies have been consulting on “specific packages of severe consequences for Russia should they go forward with military escalation In Ukraine.”
“As Secretary Blinken said, if Russia chooses to escalate, we will respond swiftly,” the spokesperson said.
Recent National Security Council meetings have included discussions of potential Russian cyber activity should tensions with the US escalate further over…