U.S. expanding sanctions against Russia for its support of separatists in Ukraine

During a statement on foreign policy Wednesday, President Obama said the United States will expand sanctions against Russia, targeting a series of banks, energy and defense companies. (Associated Press)

The Obama administration announced new, tougher sanctions against Russia on Wednesday, targeting major banks and energy companies, a significant swath of the Russian defense industry, and individuals it said were responsible for the continuing support of separatists battling government forces in eastern Ukraine.

“We have repeatedly made clear that Russia must halt the flow of fighters and weapons across the border,” President Obama said. “We have to see concrete actions and not just words.”

While earlier sanctions, primarily against individuals, have been largely brushed off as an inconvenience by their Russian targets, the new round appeared designed to cause significant blows to the Russian economy and fundamentally alter its global financial relationships.

Obama, speaking Wednesday in the White House briefing room, also discussed administration actions in the Middle East and Afghanistan. Noting the Sunday deadline for completing negotiations on Iran’s nuclear program, he described “real progress” and “a credible way forward” but indicated that additional time might be necessary to reach a deal.

He also indirectly addressed criticism that he has been inattentive and hesitant in addressing foreign policy problems. “None of these challenges lend themselves to quick or easy solutions, but all of them require American leadership,” Obama said, adding that the United States should “stay patient and determined.”

After President Obama announced the toughest sanctions yet on Moscow, Russian President Vladi­mir Putin is warning the measures will “have a boomerang effect” against the U.S. (Reuters)

The new U.S. sanctions against Russia came as European Union leaders unveiled their own list of more modest measures that cut European investment in Russia and set the stage for possible further action in the coming weeks.

In meetings among diplomats and in White House calls in recent days, administration officials had pressed for stronger European sanctions.

Russians reacted with fury to the new U.S. measures, with President Vladi­mir Putin telling journalists in Brasilia, where he is visiting, that “sanctions are driving Russian-American relations into a dead end,” the Interfax news service reported.

In Moscow, Deputy Foreign Minister Sergei Ryabkov vowed that Russia would take similar measures against the United States that would be “quite painful and serious.”

“The new decision by the U.S. administration to lodge sanctions under false pretenses against a number of Russian businesses and individuals can’t be called anything other than outrageous and totally unacceptable,” Ryab­kov told Interfax.

The new U.S. sanctions fall short of action against entire sectors of the Russian economy, which Obama said would be imposed if Russia did not halt its support of separatists in eastern Ukraine and withdraw its troops from the border area.

The measures targeted equity financing and debt financing due in more than 90 days for two Russian banks — Gazprombank, the banking arm of Russia’s largest energy company, and state-owned Vnesheconombank, or VEB — and prohibited new debt with more than 90 days maturity from U.S. institutions for OAO Novatek, Russia largest independent producer of natural gas, and Rosneft, the largest petroleum company.

The new measures also froze all U.S. assets of eight Russian defense firms and prohibited U.S. persons or anyone in the United States from dealing with them. Additional sanctions were applied to political entities and individuals in separatist regions of Ukraine.

Four senior Russian officials were also targeted, including a senior figure in the country’s domestic intelligence agency, the Federal Security Service, and the deputy chairman of the Russian Duma, the lower house of parliament.

A senior administration official said the new measures not only would “have a direct impact on the entities themselves” but also would have a “broader impact in the Russian economy . . . as the market recognizes that we are quite serious when we say that we are intent on imposing costs if the Russians don’t de-
escalate the situation” in Ukraine.

Obama said that “we are expecting that the Russian leadership will see once again that its actions in Ukraine have consequences, including a weakening Russian economy and increasing diplomatic isolation.”

As fighting between Ukrainian government forces and separatists continued, the administration charged that Russia continued to mobilize and distribute equipment, including armored vehicles, rocket launchers, artillery and air defense systems, to the separatists.

A State Department “fact sheet” this week said that “Russia continues to deploy new forces extremely close to the Ukrainian border” and was mobilizing additional units.

Obama discussed the crisis in a telephone call Tuesday evening with German Chancellor Angela Merkel, whose government has taken a hard line against Russia within Europe.

Merkel and Obama “reiterated their agreement that Russia must take immediate steps to de-escalate the situation in eastern Ukraine amid the ongoing violence there,” a White House statement on the call said.

Russian legislators and analysts in recent weeks have described two camps opening around Putin: one comprising Westernized business elites who are concerned about sanctions and the rapid drain of foreign investment from the Russian economy, and the other a more hawkish crowd of security officials who have been pushing for stepped-up military aid to Ukraine’s rebels or an outright intervention.

Gazprombank is Russia’s third-largest lender, and many Russian businesses and individuals depend on it: 45,000 businesses and 3 million private customers, according to its own count. Many of them were likely to feel a pinch from the spiraling consequences of the sanctions. Visa and MasterCard cut services to the far smaller Bank Rossiya when it was sanctioned earlier this year.

Rosneft is a titan in the global energy industry. It is run by Igor Sechin, a close Putin ally who was targeted in a previous round of sanctions. The company is based in a palatial building situated directly across the Moscow River from the Kremlin, a symbol of its central role in the Russian economy. It is also tightly bound to global energy markets.

Novatek, also a key energy company, is the second-largest producer of natural gas in Russia. A close Putin associate, Gennady Timchenko, who was already put on the sanctions list this year, owns a 24 percent stake in the company.

“The firms named are major players, and these sanctions will have significant repercussions, in my view,” said Ed Verona, a senior adviser at McLarty Associates and former president of the U.S.-Russia Business Council. “My sense is the reaction in the markets will be significant.”

Although U.S. officials declined to speculate on the effect the measures might have on U.S. businesses, several high-profile companies could be affected. In December, Morgan Stanley announced a deal to sell its oil trading business to Rosneft. Exxon Mobil, along with Norway’s state-owned Statoil and Italian oil giant ENI, has a major agreement to explore Russia’s Arctic with Rosneft.

Birnbaum reported from Moscow. Steven Mufson in Washington contributed to this report.

Michael Birnbaum is The Post’s Moscow bureau chief. He previously served as the Berlin correspondent and an education reporter.
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