President Obama expanded sanctions against top aides and reputed financial associates of Russian President Vladimir Putin on Thursday as punishment for the annexation of Crimea, and laid the groundwork for far broader measures against “key sectors of the Russian economy” if Putin further escalates his actions in Ukraine.
The broad measures potentially include Russia’s financial services, energy, mining, engineering and defense sectors, according to language in what was Obama’s third executive order in two weeks. If implemented, he acknowledged, they would not only significantly affect the Russian economy, “they could also be disruptive to the global economy.”
But “Russia must know that further escalation will only isolate it further from the international community,” Obama said in a brief statement on the White House South Lawn.
For now, the measures target Putin’s inner circle and stop well short of the kind of sanctions that have crippled Iran’s economy. Those would be triggered only by a wider military incursion, and Russian troops remain massed on Ukraine’s eastern and southern borders. And although Putin has said Russia has no further territorial designs on Ukraine, he has proved indifferent to Western threats.
Russia promptly retaliated by banning nine U.S. lawmakers and officials from entering the country. The list includes Senate Majority Leader Harry M. Reid (D-Nev.), House Speaker John A. Boehner (R-Ohio), Sen. John McCain (R-Ariz.) and three top Obama aides, the Russian Foreign Ministry said.
“We have warned repeatedly that using sanctions is a double-edged sword and will hit the United States back,” it said in a statement on its Web site.
“Washington has been repeatedly assured that it is unacceptable and counterproductive to talk with our country in such a way,” the statement said. “However, the U.S. seems to continue believing blindly in the efficiency of such methods, taken from the arsenal of the past, and does not want to admit the obvious — in complete accordance with international laws and the U.N. charter, Crimean residents voted democratically for rejoining Russia.”
The Obama administration said it is reviewing a Ukrainian request for non-lethal military assistance to help deter a Russian incursion. But a senior official, one of several who briefed reporters in a conference call about the new measures, said that “nobody wants the outcome here to be a full-bore military conflict between Russia and Ukraine,” and repeated that the United States is not considering “the introduction of U.S. military forces.”
The officials spoke on the condition of anonymity to focus attention on the president’s public remarks.
The U.S. actions came as European leaders, beginning a two-day meeting in Brussels, struggled to agree on how far they are prepared to go with measures against Russia that are likely to be far more economically damaging to their countries than to the United States. As the administration tries to coordinate with Europe, the timing of Thursday’s announcement was designed in part to stiffen European spines.
On Friday, the European Union plans to sign an agreement with Ukraine’s interim government aimed at gradually bringing it closer to membership. The Ukraine crisis began four months ago, when pro-Europe demonstrators began protesting their then-government’s refusal to sign the agreement.
Obama will travel to Europe next week to meet with the Europeans and other allies in several forums, including the European Union, NATO and the Group of Seven industrialized nations, which has been at least temporarily downsized to exclude Russia. In the current “political circumstances,” German Chancellor Angela Merkel said Thursday, “there is no G-8.”
The U.S. sanctions announced Thursday added 20 people to a handful of Russians whose U.S. and dollar assets the administration froze this week, along with what a senior administration official described as “a crony bank that handles the funds” for wealthy Russians within and outside the government.
Among those on the list are government and business leaders who have been close to Putin, some for many years. They include some of the richest men in Russia — and one Russian, Gennady Timchenko, who is in the oil-trade business in Switzerland.
Putin interests in the Swiss-based Gunvor Group, of which Timchenko is listed as a co-founder, have been long rumored but never detailed. A Treasury Department statement saying that “President Putin has investments in Gunvor and may have access to Gunvor funds” was immediately disputed by a company statement that said “President Putin has not and never has had any ownership, beneficial or otherwise in Gunvor. . . . Any understanding otherwise is fundamentally misinformed and outrageous.”
In a later statement from its Geneva headquarters, Gunvor said that as of Wednesday, “anticipating potential economic sanctions,” Timchenko had sold all his shares in the company to his partner, Torbjorn Tornqvist, a Swedish citizen.
The sanctions list also includes key officials such as Sergei Naryshkin, speaker of the lower house of parliament, and Sergei Ivanov, head of the presidential administration, as well as influential Russians in the banking and business communities, including several from Putin’s home town, St. Petersburg. Among them is Yuri Kovalchuk, a longtime Putin friend who is known as “Putin’s banker.” Kovalchuk and another person on the list, Putin aide Andrei Fursenko, are owners of Rossiya Bank, the sanctioned bank.
Senior U.S. officials said that Rossiya Bank has $10 billion in assets and that it handled financial transactions for many senior Russian officials.
“We expect that this will have a significant impact on its ability to operate,” one official said. “It will be frozen out of the dollar. All the correspondent accounts that it has with U.S. financial institutions will be terminated.” The United States would work with governments and the private sector around the world to “prevent it from operating to the greatest extent possible,” the official said.
Longtime Putin associates Arkady and Boris Rotenberg also were named. An administration official noted that the St. Petersburg-based brothers were close to the center of power, receiving $7 billion in contracts connected to the Sochi Olympics.
Russian Foreign Minister Sergei Lavrov and Secretary of State John F. Kerry spoke again by phone Thursday about Ukraine. Lavrov, a separate ministry statement said, accused the United States of “condoning” the activities of “ultranationalist and extremist forces” that he said were targeting businessmen, journalists, dissenters, Russian speakers and “our compatriots.”
The Pentagon said that Defense Secretary Chuck Hagel also spoke with his Russian counterpart, Sergei Shoigu, who told him that Russian troops along the Ukrainian border were there only to conduct exercises.
Defying U.S. and European warnings, Russia moved troops several weeks ago into Crimea, a part of Ukraine with an ethnic-Russian majority population. In short order, it organized a referendum in which Crimea voted to become part of Russia and Putin announced this week that Russia would annex the region.
On Thursday, the lower house of the Russian parliament voted 443 to 1 to admit Crimea and the metropolitan region of Sevastopol into the Russian Federation, putting some of the final procedural touches on the takeover. The bill is scheduled to be taken up Friday by the upper house, the Federation Council, where its expected approval will make Crimea officially part of the country under Russian law.
Englund reported from Moscow. Kathy Lally in Moscow and William Branigin in Washington contributed to this report.