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Britain has accused the Kremlin of being behind cyber attacks on UK soil and summoned the Russian ambassador to the Foreign Office.
For the first time, the UK's National Cyber Security Centre, the defensive branch of GCHQ, confirmed that a "low single-digit number" of public sector organisations had been hit, although it said the impact had been "low".
It refused to confirm reports that NHS trusts were among the infiltrated targets, but a Government source said the "objective was espionage, aiming to obtain information".
At the Foreign Office, Sir Philip Barton, the Permanent Under Secretary, expressed Britain's "deep concern" to Andrei Kelin, the Russian ambassador, over a "pattern of malign activity" including cyber attacks, interference in democratic processes, and the build-up of military forces near Ukraine.
The ambassador was told the Kremlin "needs to cease its provocations".
Dominic Raab, the Foreign Secretary, said: "We see what Russia is doing to undermine our democracies. The UK will continue to work with allies to call out Russia's malign behaviour where we see it."
For the first time, Washington formally identified the Russian Foreign Intelligence Service (SVR) as responsible for the SolarWinds hack. Britain also named the SVR as the culprit on Thursday night.
In the cyber-hack, Russia used US technology company SolarWinds to get into US government networks and targets in other countries.
Affected US government departments included the Treasury, Justice, Energy and Homeland Security, with officials still assessing what secrets may have been stolen. Hundreds of private US companies were also targeted.
Mr Biden on Thursday expelled 10 Russian diplomats, including some who were spies, from Washington and New York. He also launched a move to strangle Moscow's ability to borrow money, by restricting the ability of US banks to buy Russian bonds.
In an address on Thursday night, Mr Biden said that the US “cannot allow a foreign power to interfere in our democratic process with impunity."
He also said the SolarWinds hack was “totally inappropriate” and said he "was clear with President Putin that I have gone further" than the limited sanctions.
“If Russia continues to interfere with our democracy I'm prepared to take further action to respond," he added.
Six Russian technology companies accused of supporting malign cyber activities were sanctioned. Washington also sanctioned 32 individuals and entities accused of attempting to interfere in the US election last year, including by spreading disinformation.
US intelligence agencies have previously concluded that Vladimir Putin authorised an attempt to influence the election in favour of Donald Trump.
The sanctions also covered eight people and entities linked to Russia's occupation of Crimea. The Kremlin reacted angrily, summoning John Sullivan, the US ambassador, for what it called a "hard conversation".
It said the US sanctions would reduce the chances of a summit between Mr Biden and Mr Putin taking place.
Mr Biden had telephoned Mr Putin earlier this week to propose a summit amid escalating tensions on the Ukraine border, where Russia has been amassing troops (see below). Tony Blinken, the US secretary of state, said: "These actions are intended to hold Russia to account for its reckless actions."
In a statement the SVR dismissed the US claims as "nonsense".
Maria Zakharova, the Russian foreign ministry spokesman, said: "Washington should realise that it will have to pay a price. This dangerously increases the degree of confrontation between our countries. A response to sanctions is inevitable."
In a statement Nato said: "Russia continues to demonstrate a sustained pattern of destabilising behaviour. We stand in solidarity with the US."
Jake Sullivan, Mr Biden's national security adviser, said: "His [Mr Biden's] goal is to provide a significant and credible response but not to escalate the situation."
Past sanctions by the US have failed to bring an end to Russian cyber hacking. Both Barack Obama and Mr Trump expelled Russian diplomats. Last month, the US sanctioned seven Russian officials over the nerve agent attack on opposition leader Alexei Navalny.
Juliet Kayyem, a former US national security official, said the new sanctions were "significant and different", as they would affect wealthy Russians.
She said: "We're hoping to impact Putin's strength among the very rich class in Russia. It's also a warning to US financial institutions about how much they play with Russia."
Pentagon officials are increasingly concerned about Mr Putin's build-up on the Ukraine border.
Ukraine on Thursday night accused Russia of illegally closing part of the Black Sea to foreign warships. Moscow said the ban would last until October. It came after Mr Biden reversed plans to send two US destroyers into the Black Sea, a decision aimed at de-escalation.