President Joe Biden on Tuesday announced he will blacklist two Russian banks and impose further sanctions on the purchase of Russian sovereign debt as punishment for Moscow deploying additional military troops to a pair of breakaway regions in Ukraine it declared independent.

The move by the president came after an announcement by the German government that it had removed its prior certification for the Nord Stream 2 natural gas pipeline — something that had long been demanded by Republican, and many Democratic, lawmakers. The idea is to use the Russia-to-Germany pipeline as leverage against Russian President Vladimir Putin.

Collectively, the moves announced by Washington and Berlin show the two largest economies in NATO are treating Putin’s bolstering of existing Russia-aligned forces in the two separatist regions in eastern Ukraine — Donetsk and Luhansk — as the first steps of a deeper invasion of, as Biden put it Tuesday, a “big chunk” of Ukraine.

But Western leaders also made clear they are holding some of their strongest economic punishments back, hoping Putin can still be deterred from expanding his actions against Donbas into a full-fledged military assault on the rest of Ukraine. A greater incursion, officials warn, would bring with it dangerous spillover impacts for the rest of Europe and the United States. Biden, for instance, used a White House address to again warn of higher energy prices.

“Today, [Putin] asserted that these regions are — actually, extend deeper than the two areas he recognized, claiming large areas currently under the jurisdiction of the Ukrainian government,” Biden said from the East Room. “He’s setting up a rationale to take more territory by force, in my view.”

Though the United States did not immediately impose the full suite of economic penalties it has prepared, such as forcing the delisting of Russian banks from global financial transaction facilitator SWIFT, a senior administration official who briefed reporters on Tuesday on the condition of anonymity to be candid, argued the sanctions Washington and Europe came out of the gate with are severe.

Germany’s decision to halt certification of the Nord Stream 2 pipeline, in which Russia invested $11 billion, means the project “will now go to waste and it sacrifices what would have been a cash cow for Russia’s financial coffers,” the official said.

The Russian financial institutions being added to the Treasury Department’s blacklist are the state-owned development firm VEB, a “glorified Russian piggy bank” with $53 billion in assets, and Promsvyazbank, which Moscow uses for defense sector transactions, the official said.

“We’ve made a demonstration out of two very significant Russian financial institutions both of which have close ties to the Kremlin and the Russian military and collectively control over $85 billion in assets,” the official said on Tuesday. “We’re prepared to take action against other Russian banks, including the very largest ones.”

‘Cut off’

Additionally, the United States is imposing “comprehensive sanctions on Russian sovereign debt,” Biden said.

“That means we’ve cut off Russia’s government from Western financing. It can no longer raise money from the West, and cannot trade in its new debt on our markets or European markets either,” he continued.

The Treasury Department also announced new sanctions had been imposed on five Kremlin-connected elites. They include Russian Federal Security Service Director Aleksandr Bortnikov and his son, Denis, and Promsvyazbank CEO Petr Fradkov.

Additionally, the European Union announced on Tuesday it had reached unanimous agreement among its 27 member countries to impose asset freezes and travel bans on 351 members of Russia’s rubber-stamp parliament who voted earlier this month to recognize Ukraine’s separatist regions. The bloc also agreed to limit Russian banks’ access to EU financial and capital markets, and to sanction 27 other Russian individuals and entities determined to be undermining Ukraine’s sovereignty.

In announcing that “first step” sanctions package, European Union foreign affairs chief Josep Borrell said the bloc is holding back some sanctions on Russia to see if the Kremlin proceeds with the annexation of more Ukrainian territory.

“We are strongly united and we will raise the level of sanctions substantially according with the Russian behavior because many question marks are pending on this critical moment,” Borrell said at a press conference. “We will keep ammunition in our tool box in order to keep sanctioning the Russian behavior if needed.”

London also announced it is sanctioning five Russian banks and three oligarchs with close ties to Putin.

“This was the beginning of the invasion and this is the beginning of our response,” the senior Biden official said of the trans-Atlantic response. “If Putin escalates further, we will escalate further using both financial sanctions and export controls, which we’ve yet to unveil.”

Assessing the situation earlier on Tuesday, Olga Oliker, program director for Europe and Central Asia with the International Crisis Group, said the United States and its European allies are still weighing their options when it comes to how heavy of a sanctions response to immediately inflict on Russia.

“They want to send a tough message in response to Russia’s actions to date, but also don’t want to play all their cards right away, because they need to hold something in reserve to deter Moscow from sending in more troops,” she said in a statement. “They may therefore hold off on some of the toughest measures they have prepared, such as cutting off Russian state banks from the dollar. But in a rapidly changing situation, with facts on the ground difficult to ascertain, they will have to make tough calls.”

‘Permanent cancellation’

Meanwhile, foreign officials and U.S. lawmakers applauded Germany’s decision to rescind certification of Nord Stream 2.

“I welcome Germany’s move to suspend the certification of Nord Stream 2,” Ukrainian Foreign Minister Dmytro Kuleba said in a Twitter post. “This is a morally, politically and practically correct step in the current circumstances. True leadership means tough decisions in difficult times. Germany’s move proves just that.”

Kyiv has been adamantly opposed to the pipeline, which would carry Russian natural gas underneath the Baltic Sea for export to Germany and other European countries, because it would deprive the Ukrainian government of the billions of dollars in fees it currently charges Moscow for shipping gas through Ukrainian territory. They also fear Nord Stream coming online would leave their country even more vulnerable to Russia’s economic coercion.

“Germany’s suspension of the Nord Stream 2 pipeline is a welcome but overdue announcement and must be turned into permanent cancellation,” Senate Minority Leader Mitch McConnell, R-Ky., said in a statement.

Sen. Jeanne Shaheen, D-N.H., who leads the Senate Foreign Relations Europe subcommittee, also applauded Germany for its quick action in halting Nord Stream 2.

“Over the last several days, I’ve been in Europe engaging with our allies in support of Ukraine and our frontline NATO partners,” said Shaheen, who is in Poland. “Putin is using the same playbook that he’s used for decades – his statements, false flags and actions are unoriginal. We know what he is going to do, which is why the United States and the global community should continue to call it out and work together to impose punitive sanctions … and show Putin that the transatlantic community will make him pay for his actions.”