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(Bloomberg) — The far-reaching export controls that the U.S. placed on Russia a month ago still leave room for escalation in some key sectors if President Vladimir Putin continues his push forward with the invasion of Ukraine.

At the Commerce Department, Secretary Gina Raimondo’s teams are working on ways to further undermine Putin’s ability to wage war.

While much of that focuses on enforcement — such as recent action to identify more than 100 commercial and private aircraft, including billionaire Roman Abramovich’s Gulfstream business jet, for apparent violations of U.S. law — it also includes planning out the next steps in terms of prohibitions.

“We are doing constant scenario planning,” Raimondo said in an interview last week. “We have a whole menu of escalation.”

Matthew Borman, the deputy assistant secretary for export administration, told reporters on Monday that one option would be to expand restrictions on certain items to all end-users, rather than just having them apply to the military. Currently, many consumer items like smartphones, communications devices, servers and routers are still eligible to be sold to Russian civilians under license exceptions.

The U.S. also could do more to restrict American imports from Russia, take other actions in the financial sector or add more groups from Russia’s defense industrial base to the list of entities that face purchasing restrictions, Borman said.

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While Borman declined to say which specific actions may be taken, the following are some of the most likely possibilities, based on interviews with export-control lawyers and people familiar with the processes at the Bureau of Industry and Security, or BIS, the area of the Commerce Department focused on the issue. 

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Asked about these and other potential moves, a Commerce Department spokesman said all options are being considered.

Oil Equipment

Restrictions imposed on drilling equipment for Arctic, deepwater and shale exploration and production over several years by Washington since Russia’s invasion of Crimea in 2014 still allow for the sale of onshore and conventional shallow-water drilling gear from companies like Schlumberger NV and Baker Hughes Co.

The U.S. likely has held off on barring those items in an effort to limit collateral impact on the European Union, which is more dependent than the U.S. on Russian oil and gas imports.

“Comprehensively cutting off the Russian energy sector from U.S.-origin technology or goods and needed capital would further deprive the already-battered Russian economy of needed currency to support its actions in Ukraine,” said Cordell Hull, who led the BIS during the Trump administration and is now a principal at national security advisory firm WestExec.

Mining Industry

Mining equipment could be added to Commerce’s export controls, and the Treasury Department could impose a ban on imports from Russia’s mining sector. Precious metals and stones, including platinum used in catalytic converters for cars, trucks and buses, ranked as one of the biggest Russian exports to the U.S. in recent years, accounting for more than $2 billion annually.

While Biden has broad-based authority to ban imports, he would need to measure to what extent such a move would hurt U.S. industries that use the commodities as inputs, said Inu Manak, a fellow for trade policy at the Council on Foreign Relations.

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“They really have to weigh that carefully,” she said.

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A Treasury spokeswoman declined to preview potential options.

Export Embargo

The most dramatic escalation would be imposing a full export embargo –- a status currently applied to Cuba, Iran, North Korea and Syria.

Raimondo previously said that the U.S. didn’t initially implement a full ban on exports to Russia out of concern that it could hurt the nation’s people, and that the U.S. goal was to hit the military rather than citizens.

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An embargo “gets you into full pariah-nation status,” said Mike Walsh, a partner at law firm Foley & Lardner LLP in Washington who was chief of staff to Commerce Secretary Wilbur Ross during the Trump administration. “If you can’t get anything, there’s really no way for your society to advance in a meaningful way.”

The Biden administration may be holding back on exhausting its options in the hope that the threat of doing more will change Putin’s behavior, Manak said.

“At some point we’re going to run out of things we can do,” Manak said. “Doing everything right away might back Putin into a corner and prevent any solution from being achieved at all.”

©2022 Bloomberg L.P.


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