Top Russians face sanctions

U.S. prepares to ban visas, freeze assets; military ties also suspended

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WASHINGTON -- The United States prepared Monday to impose sanctions on high-level Russian officials involved in the military occupation of Crimea, as the escalating crisis in Ukraine sparked turmoil in global markets, pounding the Russian ruble and driving up energy prices.

The Obama administration suspended military ties to Russia, including exercises, port visits and planning meetings, just a day after calling off trade talks. If Moscow does not reverse course, officials said they will ban visas and freeze assets of select Russian officials in the chain of command as well as target state-run financial institutions. Congressional leaders signaled that they would follow with sanctions of their own, plus quickly approve economic aid for the fragile new pro-Western government in Ukraine and follow with sanctions of their own.

The besieged Kiev government said Monday that the Russians had deployed 16,000 troops in the region over the past week and had demanded that Ukra-inian forces there surrender within hours or face armed assault. While Russia denied that it had issued any ultimatums, it was clearly moving to strengthen its grip on Crimea, the largely Russian-speaking peninsula in southern Ukraine where Moscow has long maintained a military base.

In response to the Russian moves, European leaders have indicated Monday that they would go along with limited action such as suspending unrelated talks with Moscow and halting arms sales, but they have resisted more sweeping efforts to curb commercial activity and investment in Russia. German officials emphasized the need for diplomacy, while Dutch diplomats ruled out sanctions for now. A British government document photographed by a journalist said Prime Minister David Cameron's government would not support trade sanctions or block Russian money from the British market.

Without European backing, U.S. officials worry that economic sanctions may not carry enough bite to persuade Russian President Vladimir Putin to reverse course in Ukraine. By itself, the United States is not even among Russia's top 10 trading partners, with no more than $40 billion in exports and imports exchanged between the two each year. By contrast, Europe does about $340 billion in business with Russia, giving it far more potential clout, but also exposing it to far more potential risk.

"It's particularly important for the United States to bring Europe along," said Julianne Smith, a former national security aide to Vice President Joe Biden. "To the extent that the United States tries to put economic pressure on Russian industry, they won't feel the impact as much as they would if we had Europe standing with us. That's easier said than done."

Even without taking action, Western officials hoped the immediate and unscripted reaction of world markets would give Moscow pause. Russia's benchmark stock index dropped 9.4 percent, and the ruble fell to a record low against the dollar. The Russian central bank took the extraordinary step of raising interest rates by 1.5 percentage points, spending an estimated $20 billion to support the currency.

In his first public comments on the confrontation in three days, President Barack Obama said Monday that he was focused on assembling an economic aid package to shore up the Ukrainian government and asked that Congress make it "the first order of business," drawing quick endorsements on Capitol Hill.

"What we are also indicating to the Russians," Mr. Obama added, "is that if, in fact, they continue on the current trajectory that they're on, that we are examining a whole series of steps -- economic, diplomatic -- that will isolate Russia and will have a negative impact on Russia's economy and its standing in the world. It is likely that we will put those in place, and we are preparing that right now."

Russia responded that it was only protecting its interests and those of Russians in Ukraine. "Those who try to interpret the situation as an act of aggression, threaten us with sanctions and boycotts, are the same partners who have been consistently and vigorously encouraging the political powers close to them to declare ultimatums and renounce dialogue," Russian Foreign Minister Sergey V. Lavrov said in a speech in Geneva.

The Pentagon press secretary, Rear Adm. John Kirby, said in a statement: "Although the Department of Defense finds value in the military-to-military relationship with the Russian Federation we have developed over the past few years to increase transparency, build understanding and reduce the risk of military miscalculation, we have, in light of recent events in Ukraine, put on hold all military-to-military engagements between the United States and Russia."

The crisis prompted tense meetings at the United Nations, the NATO alliance and the Organization for Security and Cooperation in Europe. NATO called its second emergency meeting on Ukraine in response to a request from Poland under Article 4 of the North Atlantic Treaty relating to threats to a member state's security and independence.

Meeting in Brussels, European Union foreign ministers called on Moscow to return its troops to their bases and threatened to freeze visa liberalization and economic cooperation talks and skip a Group of 8 summit meeting to be hosted by Russia in June. Heads of the European Union governments will meet in emergency session Thursday to discuss the measures.

But the Europeans made clear that they are not yet willing to go as far as the United States in terms of economic strictures. German Foreign Minister Frank-Walter Steinmeier said that "crisis diplomacy is not a weakness, but it will be more important than ever to not fall into the abyss of military escalation."

Frans Timmermans, foreign minister for the Netherlands, the largest Russian export market, told reporters that "sanctions are not in order today, but sanctions will become inevitable" if there is no change in Russia's position.

Visiting Kiev, Ukraine's capital, British Foreign Secretary William Hague urged Russia to pull back its forces or face "significant costs," echoing comments made by Mr. Obama and Mr. Kerry, who was due to arrive in Kiev today.

But a British government document carried by an official near 10 Downing Street in London and photographed by a journalist indicated a resistance to tougher measures. The document, shown on BBC, said Britain should support ways of providing energy to Ukraine "if Russia cuts them off," but that European ministers should "discourage any discussion" of military preparations. "The U.K. should not support for now trade sanctions or close London's financial center to Russians," the document said.

Russia is effectively the world's biggest energy exporter, shipping 7.5 million barrels of oil a day, compared to about 1 million for Iran, which has been subject to Western sanctions. Russia is also the biggest exporter of industrial metals and the fifth-biggest consumer market globally.

"The biggest argument for severe economic sanctions not being imposed is that the European countries don't have much of an alternative to Russian energy supplies," said Jens Nordvig, the New York-based managing director of currency research at Nomura Holdings Inc.


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