Yellen Says Aim Is ‘Maximum Pain’ for Russia Without Hurting U.S.

WASHINGTON — Treasury Secretary Janet L. Yellen said on Wednesday that the United States would continue taking steps to cut Russia off from the global financial system in response to its invasion of Ukraine and argued that the sanctions already imposed had taken a severe toll on the Russian economy.

She addressed the House Financial Services Committee as the United States rolled out a new array of sanctions on Russian banks and state-owned enterprises and on the adult children of President Vladimir V. Putin. The White House also announced a ban on Americans making new investments in Russia no matter where those investors are based.

“Our goal from the outset has been to impose maximum pain on Russia, while to the best of our ability shielding the United States and our partners from undue economic harm,” Ms. Yellen told lawmakers.

The measures introduced on Wednesday included “full blocking” sanctions against Sberbank, the largest financial institution in Russia, and Alfa Bank, one of the country’s largest privately owned banks.

Sberbank is the main artery in the Russian financial system and holds over a third of the country’s financial assets. In February, the Treasury announced limited sanctions against Sberbank, but Wednesday’s sanctions, a senior Biden administration official said, will effectively freeze relations between the bank and the U.S. financial system.

The administration also announced sanctions against two adult daughters of Mr. Putin: Katerina Tikhonova and Maria Putina, who has been living under an assumed name, Maria Vorontsova. Others connected to Russian officials with close ties to Mr. Putin will also face sanctions, including the wife and daughter of Russia’s foreign minister, Sergey Lavrov, and members of Russia’s security council, including former Prime Minister Dmitri Medvedev. The official said those people would be effectively cut off from the U.S. banking system and any assets held in the United States.

President Biden said on Wednesday that the new sanctions would deal another blow to the Russian economy.

“The sense of brutality and inhumanity, left for all the world to see unapologetically,” Mr. Biden said, describing Russia’s actions as war crimes. “Responsible nations have to come together to hold these perpetrators accountable, and together with our allies and our partners we’re going to keep raising the economic costs and ratchet up the pain for Putin and further increase Russia’s economic isolation.”

Experts suggested that the latest round of sanctions were unlikely to compel Mr. Putin to change course. Hundreds of American businesses have pulled out of Russia in recent weeks, making new investments unlikely.

“The asset freezes on the additional banks aren’t nothing, but this isn’t the most significant tranche we’ve seen to date,” said Daniel Tannebaum, a partner at Oliver Wyman who advises banks on sanctions.

Other American agencies are joining the effort to exert pressure on Russia.

In a news conference on Wednesday, officials from the Justice Department and the F.B.I. also announced a series of actions and criminal charges against Russians, including the takedown of a Russian marketplace on the dark web and a botnet, or a network of hijacked devices infected with malware, that is controlled by the country’s military intelligence agency.

Justice Department officials also celebrated the seizing of the Tango, a superyacht owned by the Russian oligarch Viktor F. Vekselberg, and charged a Russian banker, Konstantin Malofeev, with conspiring to violate U.S. sanctions. Mr. Malofeev is one of Russia’s most influential magnates and among the most prominent conservatives in the country’s Kremlin-allied elite. (The indictment renders his surname as Malofeyev.)

At the hearing, Ms. Yellen told lawmakers that she believed Russia should be further isolated from the geopolitical system, including being shut out of international gatherings such as the Group of 20 meetings this year, and should be denounced at this month’s meetings of the International Monetary Fund and the World Bank. She added that the United States might not participate in some G20 meetings that are being held in Indonesia this year if Russians attended.

Ms. Yellen, whose department has been developing many of the punitive economic measures, rebutted criticism that the penalties leveled so far had not been effective, in part because there are some exceptions to allow Russia to sell energy.

“Unfortunately, many of our European partners remain heavily dependent on Russian natural gas, as well as oil, and they are committed to making the transition away from that dependence as rapidly as possible,” Ms. Yellen said. The Treasury secretary downplayed the rebound of Russia’s currency, the ruble, which cratered after the sanctions were imposed in February but has since regained its value. Ms. Yellen said that the ruble’s apparent recovery was the result of currency controls that Russia had put in place and that its exchange rate did not reflect its true value.

“The Russian economy is really reeling from the sanctions that we put in place,” Ms. Yellen said, adding, “You shouldn’t really infer anything from the value of the currency.”

Ms. Yellen argued that Russia’s invasion of Ukraine underscored the need for the United States and other countries to invest in becoming energy independent so that “dictators” did not control the price and availability of global energy supplies. She added that moving away from fossil fuels and toward renewable energy should be a priority.

The Treasury Department has been trying to create sanctions in a way that minimizes the economic blowback on the United States. However, Ms. Yellen acknowledged that inflation, which was already elevated, would now be “escalated.” She pointed to higher prices for energy, food and metals.

“We think it’s a price that’s important to pay to punish Russia for what it’s doing in Ukraine,” Ms. Yellen said.

As the crisis in Ukraine worsens, the United States and Europe have come under increasing pressure to enact a broader ban on Russian energy purchases. Ms. Yellen warned that doing so could have painful consequences on the United States and its allies.

“We’re likely to see skyrocketing prices, if we did put a complete ban on oil,” Ms. Yellen said.

The Treasury secretary acknowledged that inflation, which has become a political problem for Mr. Biden and his party ahead of the November elections, has persisted longer than the White House anticipated. She pointed to pandemic-related supply problems, including shortages of semiconductors that are limiting supplies of new cars and causing prices to rise.

Still, Ms. Yellen made the case that the economy was better off than some critics had suggested. She noted that wages for low-income workers, for instance, were outpacing price increases in the United States.

Zach Montague contributed reporting.