Background Press Call by a Senior Administration Official on the U.S. and G7 Actions to Impose Additional Severe Costs for Putin’s War Against Ukraine
MAY 08, 2022
Via Teleconference
7:21 A.M. EDT
MODERATOR: Thank you. And thanks everyone for joining us. I know it’s pretty early on a Sunday morning.
So we’re going to turn it over to [senior administration official] who is going to be our speaker for your awareness.
But this call is on background, and it’s attributable to a “senior administration official.” The contents of this call are going to be embargoed until 12:00 p.m. today.
So with that, I’m going to turn it over to [senior administration official] to give some remarks, and then we’ll take some questions.
Over to you, [senior administration official].
SENIOR ADMINISTRATION OFFICIAL: Thanks, [moderator]. Good morning. Thanks, everybody, as well for joining early. And Happy Mother’s Day.
Our sanctions design from the start has been predicated on applying economic pressure where we have an asymmetric advantage, where we and our allies produce something Russia needs and can’t easily get from anywhere else. And in doing so, we strengthen Ukraine’s position on the battlefield and at the negotiating table. That was the premise for cutting off Russia from the leading financial centers of the world — New York, London, Tokyo, Switzerland, Singapore. The oxygen of any market-based economy is financial capital, and that’s been deprived for — that’s been taken away from Russia.
That’s why we’ve denied critical technology inputs and investment capital Putin needs to replenish his weaponry and diversify growth away from just oil and gas. That’s why we’ve denied access to critical markets that Putin needs to sell his goods. No export is more important to Putin than oil; it’s the main artery of his economy. And the EU is now on the cusp of joining the U.S., Canada, and the UK in cutting off this trade.
And the same logic applies to the services ban we are announcing today. Russia has long relied on services provided by G7 countries to operate a modern economy, especially services provided by the United States and the United Kingdom, which are the dominant service providers in the world.
So today we’re banning the provision of accounting services, management consulting, marketing — all services that are used to operate multinational businesses, but also to potentially create workarounds from sanctions or to hide ill-gotten wealth. That’s why we’re shutting down these services.
We’re also announcing today that U.S. advertising dollars, broadcast technology, video cameras, microphones, equipment for sound will no longer be available to the three most watched state-owned or -controlled Russian TV stations that enable Putin’s propaganda machine.
Some of you have reported on the lies upon lies that are spread on these mouthpieces of the Kremlin, such as claiming the people of Bucha were not killed until days after Russians left the region, or that the placement of dead Ukrainian bodies was staged, or that the brave Ukrainians defending their country are actually the aggressors.
After today, no U.S. company can be in the business of funding or supporting the disinformation machine that masks the truth of Putin’s barbaric invasion behind lies and deceit.
We’re also adding to our export controls and sanctions that directly degrade Russia’s war efforts, including controls on industrial engines and bulldozers. The EU is moving in tandem with additional controls on chemicals, for example, that feed directly into Russia’s military industrial complex.
These new controls will further limit Russia’s access to components that it needs to replenish and restock its military capabilities.
As a result of our export controls applied to date, Russia’s two major tank plants, the Uralz- — I’m going to mispronounce these — the Uralvagonzavod Corporation and the Chelyabinsk Tractor Plant have halted work due to the lack of foreign components. Russian companies that operate heavy machinery made by Caterpillar or John Deere are reporting halts in their production or significant disruptions. Boeing has halted major operations in Russia and ended all exports of spare parts to Russian airlines, as has Airbus.
The last thing we’re doing today is we’re adding 2,600 visa restrictions in response to ongoing human rights violations and atrocities committed by Russian military officials and Belarusian officials, and we’re sanctioning more bank executives from the largest bank in Russia, Sberbank, as well as the third-largest bank, Gazprombank. The latter of which we have not previously touched with sanctions.
Taken together, today’s actions are a continuation of the systematic and methodical removal of Russia from the global financial and economic system. And the message is: There will be no safe havens in the Russian economy if Putin’s invasion continues.
Happy to take your questions.
MODERATOR: Thanks. Thank you. Could we please queue up the directions to ask the questions?
Q Great. Thank you so much for doing this. Good morning. And, yes, Happy Mother’s Day. [Senior administration official], can you just give a little more on this? You mentioned they were bulldozers — these are export controls. Can you dive a little bit more into that?
And can you update us on what you’re seeing in terms of Russian efforts to evade or circumvent? Is this continuing to be a problem? Is clamping down part of the discussion for the G7?
And finally, on services, does consulting services count? A lot of these major Russian companies — oligarchs — have consultants across the U.S. Is that being halted as well? Thank you.
SENIOR ADMINISTRATION OFFICIAL: Yeah, thanks, Josh. So first, on the export controls: I mentioned bulldozers, but also industrial engines. And these are all — these are all asymmetries. So we supply components that Russia needs to feed its military industrial complex. I would add chemicals, auto parts.
These are — we started out with foundational technology inputs. So, you know, we placed a lot of focus on Western microchips and the impact that’s having on precision-guided missiles.
And we’re moving — we’re broadening into industrial products that have a similar effect, we think, on Putin’s ability to prosecute his war ambitions. And that’s why we’ve added these products.
And it’s really a powerful combination because while Europe certainly has the bulk of the traded goods relationship with Russia, we do too. And now that we’ve added services, you can think of these as working in tandem. Europe has the bulk of the goods relationship with Russia. The U.S. and the UK have historically provided most of the services from the West to Russia, and we’re cutting both off. And they should mutually reinforce each other.
Your second question was on Russia’s efforts to evade or circumvent sanctions, and I am not hearing of any success Russia is having in supplying these parts from anywhere else. I mean, we mapped this out pretty carefully beforehand, in terms of our export controls and especially on technologies. And we picked — we picked goods, we picked services, we picked technologies that we and the Europeans and the G7 and our partners in Asia were the dominant suppliers of. And we don’t think Russia has many options other than to try to produce these goods or services domestically, which I think would be a very tall task.
Lastly, your question on management consulting: Yes, that is within the scope of these of this services ban. We know that these management consulting firms have tended to provide their services to the largest companies in Russia, often state-owned enterprises under the control of the Kremlin.
The same is true of the big four accountants. They employ over 10,000 people in Russia. And they’ve — together, the accountants and the management consultants, they’ve been asked, we think, by Russian companies to help them figure out how to reformulate their business strategies in the wake of sanctions — in some cases, how to get around these sanctions or, in the case of accountants, how to hide some of their wealth. And we’re shutting that — we’re shutting that down.
Q Good morning. I have two questions. One is: I don’t see lawyers or legal services on this list, and I want to ask, why? Because American lawyers historically have been valuable to Russian businesspeople in hiding their money and making investments. Why aren’t they on the list?
Second, could you speak a little bit about the problem of blowback of these and other sanctions on the Western economy?
SENIOR ADMINISTRATION OFFICIAL: Yes, David, you’re right; legal services are not on the list. And we made a judgment, at least for now, that if there was a desire to seek due process through a U.S. lawyer, we would allow that to continue. But we’re reevaluating, you know, the breadth of these services, sanctions every day. And depending on how we see behavior change over time, we can certainly broaden the sanctions.
The UK has also not banned legal services at this point either, but we’re closely talking. We’re talking very actively about whether we ought to broaden. And so, we’ll just watch what happens in the aftermath of this ban.
In terms of the spillovers, David, we’re focused, as you know, on the three main spillovers from Putin’s invasion: energy — energy being the most important to the developed world, but also food insecurity, which is, I think, the dominant concern across much of the developing world. And we’re doing all we can on both fronts.
I’ll start with food. You know all of the statistics: 30 percent of the world’s wheat exports come from Ukraine and Russia, 20 percent of corn, 80 percent of sunflower oil, and about one sixth of fertilizer. And that’s having a global impact.
What can we do about it? Well, we’re speaking out as loudly as we can that this is not the time for countries to have export bans on their food exports. For countries that have spare production capacity and food, they should produce more. For countries that have stockpiles of food, they should release those stockpiles to the countries most in need.
And the international financial institutions, the IMF and the World Bank, they can provide a targeted support to countries that have the most acute food insecurity problems. And that’s really important to prevent balance of payments issues as this invasion — if this invasion continues.
On energy, there’s a lot to say. We are — you know, we’re taking action together on Putin’s main export source, which is oil — and gas to a lesser extent — because that helps to fund his war machine. It’s the main source of relevance from the Russian economy to the rest of the world. We want to downgrade his status as a leading energy supplier.
But we want to do that while maintaining global energy supplies at a steady level. That’s why we’ve released over 200 million barrels from a strategic reserves. We’re encouraging domestic producers to respond to price signals and get together with Wall Street and see this as a moment for securing America’s energy independence.
And, you know, we can certainly surge natural gas supplies to Europe as much as we can. And we’re also working with partners in Qatar and Australia to add more natural gas supply to Europe, because that’s the key pressure point on the continent.
And this is going to be an ongoing effort; it’s not going to be easy. We have to do all of this, of course, while we’re ceding our transition towards cleaner and more reliable energy sources. And we’re — you know, the President, you’ve heard him say he wants to double down, triple down, quadruple down on that transition.
Q Thanks very much for doing this. Two questions. First, you mentioned that this was the first time you’ve gone after Gazprombank which, as you noted, was the number three bank. I assume that was because of the overall European sensitivity about going after gas and Gazprom. But tell us a little bit about what changed your mind there, and what changed the Europeans’ minds?
And second: How clear have you been to the Russians about exactly what they would need to do to get sanctions removed? Because since we’ve — it sounds like we’ve had a couple of different standards set for what the ultimate U.S. objective here is. And, of course, sanctions wouldn’t come off all at one time. But I’m just wondering what kind of clarity you have delivered to the Russians about what exactly they need to do to reverse this?
SENIOR ADMINISTRATION OFFICIAL: Thanks, David. On the first question, just to clarify: We are not sanctioning Gazprombank, in the same way that we did with SpareBank or VTB or any of the other largest banks. This is not a full block. We’re not freezing the assets of Gazprombank or prohibiting any transactions with Gazprombank.
What we’re signaling is that Gazprombank is not a safe haven, and so we’re sanctioning some of their top business executives — they’re the people who sit at the top of the organization — to create a chilling effect.
And you’re right that Gazprombank is the main way in which Russia sells gas to Europe, and so that’s why we’ve been cautious about shutting down its operations while Europe is still importing gas from Russia. But we don’t want Gazprombank to be seen as a safe haven, and that’s why we’ve taken action against its top — his top — its top people.
With respect to rollback, a few things: One, we would never do a deal on sanctions rollback without Ukraine at the head of the table.
The second, if we get to the point at which this is being discussed, it really would depend on the overall shape and scope of the diplomatic agreement that’s being negotiated.
And, you know, third, any kind of deal like that requires trust, and Putin hasn’t given the world any reason to trust his word.
And the last thing I would say is: We know, David, these sanctions work through market-based channels. Markets are forward looking. So once you change the direction of sanctions, you know, the market could very well price in the endpoint of that process. So in the same way that the market has applied a multiplier as these sanctions have been put on, it could very well do the same when they begin to be taken off. We know that, and that’s an important consideration.
Q Good morning. Just a couple of follow-up questions on these things. Number one, can you clarify when all of these sanctions will be put into place? Does it kickoff today?
Number two, can you give any more details about what the President will be discussing with his G7 counterparts? I presume this will be a good chunk of that discussion.
And number three, can you respond broadly to some criticism that these and other sanctions are hurting not only Putin and his government, but also people in Russia who would be — and who are standing up to him and working on resistance to Russia and the Kremlin?
SENIOR ADMINISTRATION OFFICIAL: Sure, Jeff. So these sanctions we’re announcing go into effect in the U.S. today, or, in some cases, they get published to the Federal Register tomorrow — the export controls, for example — but they’re going to be unveiled today. And you’ll see a factsheet on this shortly.
Other jurisdictions in the G7 are following their own processes. The Europeans are still finalizing their package, so they can speak to the timeline.
In terms of the purpose of the G7 meeting today, it’s really about honoring the incredible sacrifices that our people made, the people of Ukraine made, and even the citizens, of course, of the Soviet Union to defeat fascism. And to say, together: Putin is dishonoring those sacrifices by spreading his lies, his disinformation about the barbarism that he is committing in Ukraine. So, it’s really a chance to speak the truth and to demonstrate our continued unity and our commitment to strengthening Ukraine’s hand on the battlefield and at the negotiating table, and to also ratchet up the pain on Putin, which segues to your third question.
You know, these sanctions are not an end to themselves; they’re intended to change the strategic calculus of the target. And Putin, like any autocrat, has a social contract. And he has taken away the freedom of the people of Russia in exchange for stability, and he’s no longer delivering upon that. And so, if thousands of body bags are coming home, if debit cards aren’t working, if shelves aren’t stocked the way they used to, all people can buy anymore are knockoff clothes and phones and cars. And if Russia is eventually in default and the country is bankrupt, the question we’re putting to him: Is that the endgame he was really looking for?
Q Hi, guys, thanks so much for doing this call. Just a few more questions. To follow up, I think, on Jeff’s last question: Obviously, we had heard that this call today was deliberately planned to come ahead of Victory Day. I wonder if you could preview any of the President’s remarks today — either to G7 or if he’s going to speak about it tomorrow — specifically, on the day where a lot of folks feel like it’s going to mark a new chapter in the Russian invasion.
And secondly, on sanctions, we know that you’ve added, of course, more people to the list, but I wonder if — and I’m going to butcher her name — if there’s been an update on the U.S.’s thinking about sanctioning Putin’s rumored girlfriend, Alina Kabaeva — we’ve reported that the EU at least has thought about putting her on the list — and if you expect that to come up today?
And then on the media portion — obviously, this is something that you guys are kind of moving into this area — I wonder, in terms of when you’re talking about blocking U.S. advertising dollars, how much of an impact do you guys think that that practically will have? And has there been an effort on the U.S.’s part to kind of counter the messaging that these different propaganda machines have had actually in Russia to the Russian people?
SENIOR ADMINISTRATION OFFICIAL: Sure. So I’ll say — I’ll try to say a bit more about the G7 meeting. You know, I think what you’ll hear from the leaders today is that we have — we can take stock of where we are. And we all, I think, have the same perspective on where Putin has — where Putin has failed in this effort.
You know, in terms of his objectives, he set out, first and foremost, to divide the West, but we’re stronger and more united than at any point in the post-Cold War era.
And he aimed to undermine or topple Ukraine’s leadership, but the democratically elected government of Ukraine still stands.
And he seemed to expect a quick victory in Kyiv, but it’s still standing. And he’s now retreated and focused elsewhere.
So this is already a failure for Putin. And, you know, we’re going to continue to honor the brave fighting that’s taking place by Ukraine’s people, and listen to President Zelenskyy, and just recommit to staying the course, to staying unified. And to ratcheting up the costs on Putin to strengthen Ukraine’s hands on the battlefield and, again, at the negotiating table.
In terms of Putin’s girlfriend, I don’t have anything for you there. I know the EU is looking at this; we’re looking at this. But I don’t have an announcement for you to make on that front today.
And then lastly, on the media — the media actions, the TV stations — just to give you a bit more: We are sanctioning the three main television stations in Russia: Channel One, Russia, One, NTV. These are all stations owned by the state or controlled by the state or owned by one of Putin’s closest allies. They’re also among the most widely watched in Russia. It’s how most people in Russia get their news from the television.
And, you know, the reality is: Western companies were among the top advertisers on these stations last year — well above $300 million worth of advertising. A lot of these advertisers have announced since the invasion that they’re going to cut their business activity with these stations, but we want to make sure that decision endures and just send a broader signal that U.S. companies should not be in the business of funding Russian propaganda.
The other element of this sanction is that Russian TV stations, in many cases, rely on Western technology to broadcast the propaganda. And that’s what I was referring to when I mentioned the video cameras, the microphones, the controls for digital sound, lighting equipment, software servers. Russia can try to produce these components domestically. But the idea here is to make that commercially difficult, unprofitable, put more of the burden on the Russian state. And we’re not going to be in the business of helping them broadcast some of the lies and the deceit that you hear from Putin every day.
MODERATOR: Great. Thanks, [senior administration official]. And thanks, everyone, for joining.
As a reminder, this call was on background, attributable to a “senior administration official.” The contents of this call are embargoed until 12:00 p.m. Eastern today.
You guys should have also gotten the factsheet — embargoed until 12:00 p.m. If you didn’t, please feel free to reach out to me and we’ll make sure you get that.
So, thanks again, everyone, for joining.
SENIOR ADMINISTRATION OFFICIAL: Thanks, everybody.
7:44 A.M. EDT
