On Wednesday afternoon, just hours before Vladimir Putin launched a long-planned attack on Ukraine, a top White House official joined Yahoo Finance Live to preview the planned sanctions against Russia.
Daleep Singh, White House Deputy National Security Advisor for International Economics, underlined that the plan will be wide-ranging — and that crucial American economic allies will be on board to make the measures stick. His comments echo those made by White House press secretary Jen Psaki during her daily briefing on Wednesday afternoon.
“What people need to understand is that we follow a set of guiding principles when we think about sanctions,” said Singh, who also serves as Deputy Director of the National Economic Council. “We're not cowboys applying arbitrary and capricious sanctions to the rest of the world.”
President Joe Biden will provide more details early Thursday afternoon in a speech to the nation. In a statement Wednesday night, Biden said, “Russia alone is responsible for the death and destruction this attack will bring, and the United States and its allies and partners will respond in a united and decisive way.”
A focus on energy prices and export controls
On energy spikes as a result of the war, Singh underlined that American consumers will face higher prices — but he said the costs to Russia will be much higher.
Russia is the world's second-largest producer of natural gas and third-largest producer of crude oil. Singh said the U.S. sanctions wouldn't be designed to stop Russia oil exports — rather, cutting off the spigot there would be Putin’s choice.
“It would be a terrible mistake for Russia to weaponize its oil supply,” he said. "[Russia] depends on oil and gas revenues for its exports and for the Russian government's budget revenues.”
If gas prices do spike more, one option would be releasing more oil from the Strategic Petroleum Reserve to alleviate prices, Psaki noted Wednesday.
The sanctions to come are also set to focus largely on Russian finances — with more Russian financial institutions set to be targeted — as well as limits on the country's imports. For weeks, the Biden administration has suggested it could deploy export controls. Those controls would aim to ban foreign and domestic companies from sending Russia sought-after products like high-tech semiconductors.
Speaking to Yahoo Finance on Wednesday, Singh attempted to address a key question about those proposed sanctions. Can the White House actually exert influence in this area when 100% of the world’s most advanced semiconductors are manufactured overseas? Indeed, three-quarters of global chip manufacturing capacity is now concentrated in East Asia.
The rules “can only work in tandem with our allies and partners in Europe, but also in Asia," Singh acknowledged. “We know almost all of the leading-edge semiconductor chips are produced in Taiwan and Korea and what this rule allows us to do is to move in lockstep with our European partners as well as our Asian partners.”
While U.S.-based companies like Intel (INTC) and Qualcomm (QCOM) would fall directly under the controls, the focus in the coming weeks and months will likely be on whether companies like Samsung (based in South Korea) and Taiwan Semiconductor Manufacturing Company comply.
The overall plan, says Singh, is “what we'll create is a negative feedback loop, a vicious feedback loop between capital outflows, a weaker currency, imported inflation, higher imported inflation, a hit to Russia's purchasing power, lower investment, and lower growth.”
Ben Werschkul is a writer and producer for Yahoo Finance in Washington, DC.
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