Instead of a sweeping package that crippled top Russian banks, cut its financial transactions off from the global economy, or personally singled out President Vladimir Putin, the U.S. and its allies settled on a modest “first tranche” of penalties. Markets responded with a shrug.

The sanctions targeted a pair of Russian banks, VEB.RF and Promsvyazbank as well as three members of Russia’s elite with close ties to the Kremlin. The penalties also sought to freeze future purchases of Russian sovereign debt. 

Yet the sanctions hardly amounted to the precedent-shattering, economy-crippling measures the U.S. and its partners long telegraphed if Russian troops were to roll across the border. 

White House officials spent Tuesday afternoon trying to defend the measured approach, as questions swirled over whether their response would be enough to deter the Kremlin from mounting a bigger assault. Moscow has denied it plans to invade Ukraine and Putin has said he does not currently plan to send forces — he has called them “peacekeepers” — into the breakaway areas of eastern Ukraine, although the treaties he signed with the separatist leaders allow him to do so and build Russian bases.

Putin has said that the crisis could be averted if Ukraine accepted demands that included recognizing Russian sovereignty over Crimea and renouncing its bid to join NATO.

U.S. equity futures and Asian shares rose Wednesday, suggesting investors also see the initial sanctions as limited. Demand for traditional havens like gold also eased. Brent crude, which came close to $100 per barrel a day earlier partly on worries about potential disruption to Russian supplies, was steady around $97 a barrel.

The most consequential move came from Germany, which announced it was halting certification of the Nord Stream 2 pipeline and threw into jeopardy the $11 billion project that would have solidified Russia’s grip on Europe’s energy sector. Top U.S. diplomat Antony Blinken later announced a summit this week with Russian Foreign Minister Sergei Lavrov was off.

Geopolitical Peril

“This was the beginning of an invasion, and this is the beginning of our response,” Daleep Singh, the deputy national security adviser for international economics told reporters in Washington.

For Biden, the approach carries geopolitical danger.

Putin has long preyed on disunity and disorganization in the West as he pursued land grabs closer to home. Under closer inspection these Western measures might not appear as muscular as they seem on first glance. 

One of the banks targeted by the U.S. had been under restrictions since 2014, and the U.S. already had limited prohibitions on Russian sovereign debt in place since 2019. Stocks in Europe recouped losses as investors learned the details of the penalties, while crude oil futures and the ruble erased declines.

Brian O’Toole, a senior fellow at the Atlantic Council who previously worked in the U.S. Treasury Department’s sanctions unit, called Biden’s sanctions “incremental.” 

“We must wait to see if the U.S. will impose the impact they’ve promised for further aggression and how that is defined,” he said. “I fear at the moment that Putin may not think the West has the stomach to follow through.”

Bipartisan Criticism

Biden is also facing intensifying criticism from hawkish lawmakers on both sides of the aisle. Republicans who encouraged him to impose sanctions before any attack by Putin spent Tuesday criticizing his actions as ineffectual half-measures, with Senator Lindsey Graham calling the developments “the 1930s all over again.”

But the South Carolina Republican wasn’t the only one to raise the specter of World War II-era appeasement. Allies like Senator Bob Menendez, the New Jersey Democrat who chairs the Foreign Relations Committee, said the U.S. should levy the “overwhelming amount” of sanctions now in order to deter further aggression by Russia.

“I don’t know what we need to wait for,” Menendez said in an interview with CNN. “What we can’t have here is another Munich moment,” a reference to a 1938 agreement that allowed Nazi Germany to seize part of Czechoslovakia.

The response leaves Biden vulnerable to criticism that the White House has once again over-promised and under-delivered on the world stage. Earlier this month, his aides publicly insisted they would immediately impose penalties inflicting significant costs on the Russian economy.

“We would not adopt the traditional escalatory ladder that we’ve used in the past, where we begin with targeted sanctions on government officials, move on to state-owned entities and then the strategic sector,” White House aide Peter Harrell told a sanctions conference on Feb. 2. “Instead, we expect to adopt a ‘start high stay high’ approach.”

Yet the package unveiled Tuesday appeared more like the product of a rushed effort after Putin recognized breakaway territories in Ukraine’s Donbas region while avoiding, at least for now, a full-scale invasion of his neighbor.

The move came as the U.S. was also evaluating an eleventh-hour gambit by French President Emmanuel Macron to broker a summit between Biden and Putin to avert war. While both the Kremlin and White House signaled they could theoretically see such a conversation happening, the prospect collapsed as quickly as it emerged. The White House formally ruled out the possibility on Tuesday evening. 

Both developments complicated U.S. intelligence that officials say show the Russians readying a wide scale assault that could include the seizure of the Ukrainian capital of Kyiv. American officials were so convinced that a broad incursion could be in the works that diplomatic staffers retreated across the border to Poland on Monday night.

Privately, administration officials said they continue to believe Putin is readying such an offensive — and those expecting a more aggressive response sanctions package might not have long to wait.

One person familiar with the administration’s thinking said the U.S. still anticipated further Russian moves in the next 24-48 hours, which would trigger additional sanctions. In his address announcing the penalties, Biden said it appeared that Putin was laying the groundwork for Russian forces to move into areas now administered by the Ukrainian government — an action a second person familiar with the administration’s planning would prompt the president to unleash additional penalties.

Officials also argued that critics were misconstruing how sanctions worked, saying the impact would grow gradually but significantly over time.

Still, the White House publicly insisted that the package it presented was already significant, implemented faster and more aggressively than the response after Putin annexed Crimea during the Obama administration.

‘Sharp Edge of the Pain’

“President Biden has rallied the world, rallied Europe, to stand up to the actions of President Putin,” White House Press Secretary Jen Psaki said Tuesday.

Singh took the unusual step of outlining some of the specific individual measures in the chute were Russia to move further, saying the administration was “ready to press a button to take action on the two largest Russian financial institutions, which collectively hold almost $750 billion in assets.” 

Measures being prepared by the White House include actions affecting Sberbank and VTB Bank if an invasion proceeds, as well as export control measures in coordination with a large number of allies and partners.

“Make no mistake, this is only the sharp edge of the pain we can inflict,” Singh said.