U.S. and Europe raise sanctions on Russia, but allies show strain

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WASHINGTON — Struggling to defuse the persistent crisis in Ukraine, both the United States and the European Union on Wednesday imposed new economic sanctions on Russia, with President Barack Obama declaring that Russian leaders must see that their actions supporting rebels “have consequences.”

Though the U.S. and European sanctions were coordinated, they nonetheless exposed fissures in what the West has tried to project as a united front in its months-long effort to isolate Russian President Vladimir Putin.

Putin, sounding unperturbed, said the U.S. was only hurting itself.

The penalties announced by the White House were broad in scope, targeting two major Russian energy firms, a pair of powerful financial institutions, eight arms firms and four individuals. Leaders in Europe, which has a far deeper economic relationship with Russia than the United States does, were more restrained — ordering investment and development banks on the continent to suspend financing agreements with Moscow.

Even the U.S. penalties stopped short of the most stringent actions the West has threatened, which would entail fully cutting off key sectors of Russia’s economy. But officials said those steps were still on the table if Russia fails to abide by the West’s demands to stop support for pro-Russian insurgents who have destabilized swaths of eastern Ukraine.

“What we are expecting is that the Russian leadership will see once again that its actions in Ukraine have consequences, including a weakening Russian economy and increasing diplomatic isolation,” Mr. Obama said as he announced the U.S. penalties from the White House.

Publicly undismayed, Mr. Putin said the new sanctions run counter to U.S. national interests because they put American companies that want to operate in Russia at a competitive disadvantage. At a news conference in Brazil, Mr. Putin said through a translator: “They are undermining the positions of their energy companies.” He added, “They made one mistake, and now they insist on making another one.”

Until now, the United States and Europe have limited their sanctions on Russia to travel bans and asset freezes aimed at individuals and entities, including some with close ties to Mr. Putin. But those measures have done little to change the Russian leader’s calculus, with the Pentagon announcing Wednesday that Russian troops were again building up along the Ukraine border. In Ukraine itself, pro-Russian rebels in the east have lost much ground but now seem to be hunkering down for what could be extended urban warfare.

Ukraine‘‍s government in Kiev as well as the West have accused Russia of fomenting the insurgency by sending troops and weapons across its border with the former Soviet republic, activity that Moscow denies. The insurgency was sparked by Russia’s annexation of the Crimean Peninsula from Ukraine earlier this year.

While Mr. Obama has put a premium on responding to the provocations in coordination with Europe, the White House has grown increasingly frustrated with the continent’s reluctance to impose sanctions on Russian economic sectors. EU leaders fear that such penalties could have negative impacts on their own economies, given their close financial relationships with Russia.

U.S. officials on Monday summoned European diplomats to the White House to discuss the matter and warn that Mr. Obama was prepared to take unilateral action if the EU did not take stronger measures during a meeting Wednesday in Brussels. After meeting late into the night, the EU said it was asking the European Investment Bank to sign no new financing agreements with Moscow. The EU also agreed to suspend financing of the new European Bank for Reconstruction and Development operations in Russia.

European leaders also signaled for the first time their willingness to go after Russian companies “that are materially or financially supporting actions undermining or threatening Ukraine’s sovereignty, territorial integrity and independence.” They ordered their foreign ministers to draw up a list of such people or entities by the end of the month.

Lithuanian President Dalia Grybauskaite, whose nation borders Russia, said the EU had to get tougher with Moscow, “because if Putin’s aggressive policy isn’t stopped, he will go further.”

The targets of the U.S. sanctions include two major Russian energy firms: Novatek, the country’s largest independent natural gas producer, and Rosneft, Russia’s largest petroleum company and third-largest gas producer. The penalties bar both from getting long-term loans from U.S. entities. Also targeted were leading Russian financial institutions, the Russian development bank VEB and Gazprombank, banking arm of Russia’s state energy behemoth Gazprom. The sanctions restrict their ability to access U.S. capital markets.

Steven Pifer, former U.S. ambassador to Ukraine, said the U.S. sanctions will add uncertainty to a Russian economy that has already been showing signs of weakness. “These are serious sanctions. They target major Russian energy companies and financial institutions,” said Mr. Pifer, who now is a Brookings Institution analyst in Washington.

The sanctions were welcomed with muted praise from some Capitol Hill Republicans, who have contended that Mr. Obama’s warnings of tougher action have been little more than empty threats. “While the delay in imposing real costs on Russia has been damaging to U.S. credibility, today’s announcement by the administration is definitely a step in the right direction,” said Tennessee Sen. Bob Corker, the Senate Foreign Relations Committee’‍s top Republican.

Also included on Wednesday’s sanctions list were four individuals: Putin adviser Igor Shchegolev, Russian State Duma Deputy Speaker Sergei Neverov, Ukrainian separatist leader Aleksandr Borodai and Sergey Beseda, an official with Russia’s Federal Security Service, the intelligence agency that replaced the KGB after the Soviet Union‘‍s collapse.

United States - North America - United States government - Russia - Eastern Europe - Europe - Barack Obama - District of Columbia - Ukraine - Vladimir Putin - European Union - Bob Corker - Moscow - Russia government - Dalia Grybauskaite


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