Ms. Kabaeva, a former Olympic champion rhythmic gymnast known in the sport for her extreme flexibility and an international doping scandal, is suspected of playing a role in hiding Mr. Putin’s personal wealth overseas, U.S. officials said, and remains a potential sanctions target.

The belief among U.S. officials debating the move is that sanctioning Ms. Kabaeva would be deemed so personal a blow to Mr. Putin that it could further escalate tensions between Russia and the U.S. The 69-year-old Mr. Putin has never acknowledged a relationship with Ms. Kabaeva, a 39-year-old former cover model for Russian Vogue…

The U.S. has imposed sanctions on Mr. Putin’s two adult daughters. Moving against Ms. Kabaeva, described by the U.S. government as Mr. Putin’s “mistress,” is among the actions deemed confrontational enough to further complicate efforts for a negotiated peace in Ukraine, officials said.