U.S. President Barack Obama on Wednesday announced the most wide-ranging sanctions yet on the Russian economy, targeting key institutions including Gazprombank and Rosneft Oil Co, as well as other energy and defense companies.
Washington has steadily escalated its financial sanctions on Russia over what it views as Moscow's interference in its neighbor Ukraine and its annexation of the Crimea region. Obama said the United States could impose further sanctions if Russia did not take concrete steps to ease the conflict.
The targeted companies also include Russia's second-largest gas producer, Novatek, Vnesheconombank, or VEB, a state-owned bank that acts as payment agent for the Russian government, and eight arms firms.
The U.S. Treasury Department, which posted the sanctions on its website, said the measures effectively closed medium- and long-term dollar funding to the two banks and energy companies. But the sanctions did not freeze those four companies' assets.
The sanctions stopped short of targeting Russia's Gazprom, the world's largest natural gas producer and provider of much of Europe's energy supplies. Gazprombank is 36 percent-owned by Gazprom.
"These sanctions are significant, but they are also targeted, designed to have the maximum impact on Russia while limiting any spillover impact on American companies or those of our allies," Obama told reporters.
The new measures were announced on the same day that European Union leaders met in Brussels and agreed to expand their own sanctions on Russia.
The new U.S. sanctions also include Feodosiya Enterprises, a shipping facility in Crimea, and senior Russian officials, several of whom had already been targeted by the European Union.
The affected senior officials included the deputy head of the State Duma, or parliament, the minister of the Crimea, a commander of the Russian intelligence agency FSB, and a Ukrainian separatist leader.
"We have emphasized our preference to resolve this issue diplomatically," Obama said. "We have to see concrete actions, not just words, that Russia in fact is committed to trying to end this conflict."
He said Russia had continued to support separatists in east Ukraine, sending fighters and weapons across the border.
President Obama's full speech:
"Finally, given its continued provocations in Ukraine, today I have approved a new set of sanctions on some of Russia's largest companies and financial institutions.
Along with our allies, with whom I have been coordinating closely over the last several days and weeks, I have repeatedly made it clear that Russia must halt the flow of weapons and fighters across the border into Ukraine; that Russia must urge separatists to release their hostages and support a ceasefire; that Russia needs to pursue internationally mediated talks, and agree to meaningful monitors on the border.
I have made this clear directly to Mr Putin. Many of our European partners have all made this clear directly to Mr Putin. We have emphasised our preference to resolve this issue diplomatically, but that we have to see concrete actions and not just words, that Russia is in fact committed to trying to end this conflict along the Russia-Ukraine border.
So far, Russia has failed to take any of the steps that i mentioned.
In fact Russia's support for the separatists and violations of Ukraine's sovereignty has continued.
On top of the sanctions we have already imposed, we are therefore designating selected sectors of the Russian economy as eligible for sanctions.
We are freezing the assets of several Russian defence companies and we are blocking new financing of some of Russia's most important banks and energy companies. These sanctions are significant but they are also targeted, designed to have the maximum impact on Russia while limiting any spillover effects on American companies or those of our allies.
Now we are taking these actions in close consultation with our European allies, who are meeting in Brussels to agree on their next steps. And 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.
Meanwhile, we're going to continue to stand with the Ukrainian people, as they seek to determine their own future. And even in the midst of this conflict they have made remarkable progress. These past few months they have held democratic elections, they elected a new president, they're pursuing a course of reforms and they signed a new association agreement with the European Union. And the United States will continue to offer our strong support to Ukraine to help stabilise its economy and defend its territorial integrity. Because, like any people, Ukrainians deserve the right to forge their own destiny.
So, in closing, I'll point out the obvious: we live in a complex world and at a challenging time. And none of these challenges lend themselves to quick or easy solutions, but all of them require American leadership, and as commander in chief I'm confident that if we stay patient and determined, we will in fact meet these challenges."
RUNNING OUT OF PATIENCE
Obama in recent weeks has repeatedly threatened new sanctions, and appears to have run out of patience as fighting continued to rage in eastern Ukraine.
The new sanctions were unlikely to please Republican lawmakers, many of whom have been calling for the imposition of sanctions on entire Russian industries, rather than specific companies, as the best way to control Russian President Vladimir Putin.
Washington said on Wednesday that up to 12,000 Russian forces were back on the border with Ukraine and that weaponry was crossing over to pro-Russian separatists.
"These are combat forces," Pentagon spokesman Colonel Steve Warren told reporters. The increase in the Russian presence occurred several weeks after Moscow had drawn down its forces in the area to about 1,000 troops.
Rosneft, Russia's largest oil company, had no immediate comment. Morgan Stanley, which is selling the majority of its global physical oil trading operations to Rosneft, declined to comment.
For more details on the sanctions, see 1.usa.gov/1tSqqVG.
Reuters: 17. July 2014
European Union leaders want to block loans for new projects in Russia by two multilateral lenders and to broaden sanctions to target companies that help destabilise Ukraine, according to a draft statement seen by Reuters.
The EU leaders, meeting in Brussels on Wednesday, will step up sanctions because pro-Russian rebels in eastern Ukraine have not met their demands to end violence.
But the proposed new measures still fall short of the hard-hitting sanctions on sectors of the Russian economy that the United States and the Ukrainian government have called for.
German Chancellor Angela Merkel, arriving for the summit, said the EU leaders would talk about new sanctions "because we believe that the Russian contribution to peace in Ukraine is not yet sufficient".
British Prime Minister David Cameron said the situation in Ukraine was unacceptable. "The territorial integrity of that country is not being properly respected by Russia and we need to send a very clear message with clear actions," he said.
The leaders will ask the bloc's bank, the European Investment Bank (EIB), to suspend financing of new public sector projects in Russia, the draft statement said.
EU countries will work together within the European Bank for Reconstruction and Development (EBRD) to halt EBRD financing of new projects in Russia, it said.
The leaders will also ask the EU's executive Commission to look into suspending some cooperation programmes that are set to benefit Russia to the tune of around 450 million euros ($609 million) (355 million pounds) between now and 2020.
The EU will broaden the scope of asset freezes to allow the bloc to target companies and other organisations "that are supporting materially or financially actions undermining ... Ukraine's sovereignty", according to the draft statement, which could still be changed after the leaders' discussions.
BROADER SCOPE
The broadening of the criteria would allow the EU to impose sanctions on Russian or Ukrainian companies that help or finance separatist activities in eastern Ukraine.
Previously, only companies confiscated following Russia's annexation of Crimea in March or firms linked to a person targeted with sanctions could be put on the sanctions list.
The EU has so far imposed asset freezes on 72 people and two Crimean energy companies.
"I think that some additional steps will be taken, especially concerning the loans and financial assistance from the European Investment Bank and EBRD (and) against the separatists and supporters of separatists," Lithuanian President Dalia Grybauskaite said on arrival at the summit.
But she said the EU was "still far away" from a decision to impose sanctions on sectors of the Russian economy, or an arms or technology embargo.
Making clear that Europe was divided on the issue, Swedish Prime Minister Fredrik Reinfeldt said he favoured going further and putting sanctions on sectors of the Russian economy.
French Foreign Minister Laurent Fabius said the modest strengthening of sanctions was designed to show firmness while keeping dialogue open. He said there were no plans for an arms embargo - a sensitive question for Paris, which plans a 1.2 billion euro sale of helicopter carriers to Russia.
The 28-nation EU has been under strong pressure from the United States and Ukraine to take a harder line against Russia but some EU governments are wary of potential retaliation from Russia, the bloc's biggest energy supplier, if they did so.
LIMITED IMPACT
Blocking some loans to Russia through the EIB and EBRD marks a tightening of EU pressure but analysts said it would not have a severe economic impact on Russia.
"EBRD and EIB assistance is useful for Russia as it targets good projects that are aimed at modernising the economy and improving the investment climate," said Tatiana Orlova, a strategist at RBS in London.
"But the scope of those projects is relatively modest and Russia is not dependent on these banks' assistance," she said. "Unless we see names of important companies, markets won't really react too much."
Russia is one of 64 countries that are shareholders of the EBRD but, if it wins the support of other pro-Western countries, the EU should be able to block loans for new Russian projects.
Russia has traditionally been the biggest recipient of the London-based EBRD's funds - the bank lent 1.8 billion euros ($2.44 billion) there last year. The EIB typically lends around 300-500 million euros a year to public sector projects in Russia.
Both banks declined comment.
The United States has mounted a diplomatic campaign over the last few days to persuade the EU to sign up to tougher sanctions, according to a European diplomat.
EU leaders will also ask officials to draw up proposals for further measures to restrict investment in Crimea, whose annexation by Russia is not recognised by the EU.
The leaders will say they expect international financial institutions to refuse to finance any project that recognises the annexation of Crimea, according to the draft.
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