U.S. President Barack Obama during a joint news conference with Philippines President Benigno Aquino III, at Malacanang Palace in Manila, April 28, 2014.
U.S. President Barack Obama during a joint news conference with Philippines President Benigno Aquino III, at Malacanang Palace in Manila, April 28, 2014.
U.S. President Barack Obama during a joint news conference with Philippines President Benigno Aquino III, at Malacanang Palace in Manila, April 28, 2014.

The United States expanded its sanctions against Russia on Monday, targeting members of President Vladimir Putin’s “inner circle” and technology that could be useful to Russia’s military, in response to Russia’s ongoing involvement in Ukraine.

President Barack Obama said the U.S. is holding broader sanctions against Russia’s economy, such as its banking or defense industry, “in reserve.”

“The goal here is not to go after Mr. Putin personally,” Obama said. “The goal is to change his calculus with respect to how the current actions that he is engaging in in Ukraine could have an adverse effect on the Russian economy over the long-haul, and to encourage him to actually walk the walk and not just talk the talk when it comes to diplomatically resolving the crisis in Ukraine.”

A White House statement said: “Since April 17, Russia has done nothing to meet its Geneva commitments and in fact has further escalated the crisis.” It also called Moscow’s involvement in eastern Ukraine violenceindisputable.”

A senior Russian diplomat criticized the new round of U.S. sanctions saying it marked a return to “Cold War” practices.

In comments posted on the Foreign Ministry’s website, Deputy Foreign Minister Sergei Ryabkov said, “We decisively condemn the series of measures that has been announced in an attempt to put sanctions pressure on Moscow.”

The Department of the Treasury is also imposing sanctions on seven Russian government officials, including two members of Putin’s inner circle. They will be subject to an asset freeze and a U.S. visa ban.

Also, 17 companies linked to Putin’s inner circle will be subject to an asset freeze, the statement said.

The seven include (see the full list of targeted individuals and companies):

Oleg Belavencev, Russian presidential envoy to the Crimean district and a member of the Russian Security Council;

Vyacheslav Volodin, first deputy chief of the staff of the presidential executive office;

Dmitry Kozak, deputy prime minister of the Russian Federation;

Evgeniy Murov, director of the Federal Protective Service of the Russian Federation and an army general;

Aleksei Pushokov, chairman of the state Duma committee on International Affairs;

Igor Sechin, president and chairman of the management board for Rosneft, Russia’s leading petroleum company;

Sergei Chemezov, director general of Rostec, the state corporation for promoting development, manufacturing and export of Russian high-tech industrial products.

The 17 companies targeted in the sanctions (full list here) include Stroygazmontazh (SGM Group), a gas pipeline construction company, and Transoil, a Russia-based rail freight operator that specializes in the transportation of oil and oil products.

Notably absent from the sanctions list is Gazprom, Russia’s giant natural gas monopoly, and its CEO, Alexei Miller. A number of observers had predicted Gazprom and its head would be targeted.

The Department of Commerce also is imposing additional restrictions on 13 of the 17 companies by issuing a license requirement “with a presumption of denial for the export, re-export or other foreign transfer of U.S.-origin items to the companies.”

Commerce and the State Department announced a tightened policy to deny export license applications for any high-technology items that could contribute to Russia’s military capabilities.

Those departments also will revoke any existing export licenses that meet these conditions.

Also on Monday, Canada will impose sanctions on two Russian companies and nine individuals, a government source said.

The source did not provide names but said the list would be released soon.

Russian response

Putin’s top economic adviser said on Monday the new round of U.S. sanctions targeting Russian officials and companies will have little effect on the country’s economy and will only strengthen the resolve of the Kremlin and its allies.

“The more sanctions there are, the more strongly the elite will consolidate,” Kremlin adviser Andrei Belousov said.

“There will probably be some consequences [for the economy] … but it is unlikely that they will have a serious impact on an operational, annual level,” Belousov said of the sanctions.

He added that, in his view, the new sanctions do not give sufficient grounds to change the country’s budget rule, which limits government spending.

Also Monday, Russia’s Volga Group, which is on the list of sanctioned companies and controlled by sanctioned owner Gennady Timchenko, claimed the new U.S. sanctions are not related to events in Ukraine, but are politically motivated.

EU considering sanctions
The European Union is expected to impose sanctions Monday on about 15 Russian officials who are believed to be undermining democracy and creating chaos in Ukraine, according to Western diplomats and reported by CNN.

The sanctions will include asset freezes and travel bans.

Ambassadors from the 28 EU states are meeting in Brussels.

Obama said the measures do not yet include the wider sanctions, such as curbs on the Russian financial and energy sectors, that would do the most serious damage to Russia’s economy.

“We are keeping in reserve additional steps that we could take should the situation escalate further,” Obama said, acknowledging that he did not know if the measures he has ordered so far will work.

Many Europeans oppose sanctions that would target the economy, because economic sanctions would hurt European economies as well as that of Russia.

The U.S., being economically tied with Russia to a much lesser degree than Europe, says it would not impose economic sanctions unilaterally.

However, European leaders were giving more consideration to broad sanctions against sectors of the Russian economy after pro-Russian rebels in eastern Ukraine held seven monitors from the Organization for Security and Cooperation in Europe (OSCE), a U.S. official said Monday.
“We have noticed a distinct uptick in the last three days from major European capitals in continuing to look very hard at sectoral (sanctions) in response to the egregious treatment of the … monitors in Slovyansk,” a U.S. official said.

The OSCE had sent unarmed monitors to try to encourage compliance with a peace deal. The rebels seized them and have been holding them at a fortified redoubt in the town of Slovyansk.

Moscow: Sanctions pointless

Nevertheless, such measures have done nothing so far to deter Putin, who overturned decades of post-Cold War diplomacy last month to seize and annex Ukraine’s Crimea peninsula and has since massed tens of thousands of troops on the frontier.

He acted after Ukraine’s pro-Russian president was ousted in February by protesters demanding closer links with Europe.

Moscow has in the past shrugged off targeted sanctions like those Obama announced on Monday as pointless.

Washington says armed rebels – who have captured towns and government buildings across eastern Ukraine – are operating under the direction of Kremlin agents.

Russia denies it is involved and says the uprising is a spontaneous response to oppression of Russian speakers by Kyiv.

The rebels took another town on Monday morning, seizing the police headquarters and municipal administration building in  Kostyantynivka, an industrial city in the eastern Donetsk region. Separatists in the province have proclaimed an independent “People’s Republic of Donetsk.”

A Reuters photographer at the scene saw about 20 gunmen controlling the administration building.

Also on Monday morning, Hennady Kernes, the mayor of Kharkiv, was shot in the back  while cycling on the outskirts of the city.

He underwent surgery, city hall officials said, and was reported to be in “grave, but stable” condition.

No arrests were reported, and officials have not commented on who could be behind the attack — and Kernes was a man who could have angered both sides.

Kernes was a staunch opponent of the pro-West Maidan movement that toppled President Viktor Yanukovych in February and was widely viewed as the organizer who sent activists to Kyiv from eastern Ukraine to harass those demonstrators.

But he has since softened his stance toward the new Kyiv government.
At a meeting of eastern Ukrainian leaders and acting Prime Minister Arseniy Yatsenyuk earlier this month, Kernes insisted he does not support the pro-Russia insurgents and backed a united Ukraine.

Pressure in U.S.

Obama is under pressure from opposition Republicans at home to move faster on sanctions. But in taking what he described as “calibrated steps”, he has emphasized the need to act in concert with European countries, which have more at stake economically and a more cumbersome process for taking decisions.

The EU does more than 10 times as much trade with Russia as the U.S. and buys a quarter of its natural gas from Moscow. Most EU decisions require unanimity among member states.

Western countries say the targeted sanctions are already having an effect on Russia by scaring investors into pulling out capital. The central bank has been forced to raise interest rates to prop up the rouble and Russian firms are finding it more difficult and costly to raise funds.
U.S.Treasury Secretary Jack Lew said in a statement Monday: “Today’s targeted actions, taken in close coordination with the EU, will increase the impact we have already begun to see on Russia’s own economy as a result of Russia’s actions in Ukraine and from U.S. and international sanctions.

“Russian economic growth forecasts have dropped sharply, capital flight has accelerated and higher borrowing costs reflect declining confidence in the market outlook,” the statement continued.

Russian shares dropped on anticipation of the impact of new sanctions. The rouble-denominated MICEX index was down 1.3 percent early on Monday. The cost of insuring Russia’s debt against default rose to its highest level since November 2011.

Monday’s sanctions build on those imposed over Crimea last month, which were deliberately designed to punish individuals close to Putin without having wider impact on Russia’s economy or its trade with the West.

Some information for this report was provided by Reuters.

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