U.S., EU Ready New Sanctions as Russia Prepares Response

By Margaret Talev, Gregory Viscusi and Brian Wingfield  

Photographer: Bulent Kilic/AFP via Getty Images

Russia hasn’t effectively put pressure on the separatists to force them to negotiate... Read More

Related

• Russian Banks Seen Facing `Big Impact' of Sanctions
• U.S., EU Moving on New Russia Sanctions: Blinken

The U.S. and the European Union may move as soon as today to impose tougher sanctions on Russia as Vladimir Putin’s government formulates its response to the growing international pressure.
The sanctions target “key sectors” of Russia’s economy -- finance, defense and energy -- and are being imposed in the face of Putin “doubling down” in support of separatists battling Ukrainian troops, U.S. Deputy National Security Adviser Tony Blinken said yesterday. EU governments agreed yesterday to impose travel bans and asset freezes on Putin’s “cronies.”

“The longer this goes on, there is the risk of further outrageous actions by the separatists or by Russia that deepen the international crisis,” Blinken said. “So there’s a need to take further action now to convince Russia to change course.”
The tighter sanctions were agreed on during a video and telephone conference yesterday involving President Barack Obama, German Chancellor Angela Merkel, French President Francois Hollande, U.K. Prime Minister David Cameron and Italian Premier Matteo Renzi. So far, EU governments, dependent on Russia for trade and about one-third of their energy supplies, haven’t gone as far as the U.S. in hitting Russia’s $2 trillion economy.

Photographer: Andrey Rudakov/Bloomberg

Russia's President Vladimir Putin.

‘Concrete Steps’

Russia hasn’t effectively put pressure on the separatists to force them to negotiate and hasn’t taken the “concrete steps” asked of it to control Ukraine’s border, Hollande said in a statement.
The names of Europe’s latest targets, approved by diplomats from the 28-nation bloc at a meeting in Brussels, will be published in the EU’s Official Journal “late” tomorrow, an official said on condition of anonymity.
While sanctions already in place are squeezing Russia’s economy, they haven’t forced a political change, according to Blinken, who said the nation has extended support for the rebels in eastern Ukraine since the July 17 downing of a Malaysian jet. The U.S. also found Russia violated a Cold War-era arms treaty on making, possessing or testing a type of cruise-missile, an Obama administration official said.
The International Monetary Fund cut its forecast for Russia’s 2014 economic growth last week to 0.2 percent from 1.3 percent, citing capital flight fueled by the Ukraine conflict.

Worst Performer

Russia is this year’s worst performer among the world’s 20 biggest stock markets as the dollar-denominated RTS Index dropped 15.7 percent. The benchmark Micex Index (INDEXCF) rose 0.9 percent today in Moscow, its first advance in three sessions.
The U.S. will probably deny Russia access to oil-production equipment for use in the Arctic and deep waters, and add more banks and energy companies to a list of those banned from U.S. financing, New York-based Eurasia Group said in a report.
Robert Kahn, a former Treasury official who’s now a senior fellow for international economics at the Council on Foreign Relations in Washington, said the Obama administration may match the EU’s sanctions list and prohibit additional financial activities such as foreign exchange or commodities trading with certain Russian companies.
“You will see a significant and long-term decline in the Russian economy from these sanctions,” Kahn said by phone.
Russian Retaliation?
Russian Foreign Minister Sergei Lavrov said yesterday in Moscow that sanctions against his country won’t achieve their goal and that Russia will become self-sufficient. Putin held a meeting yesterday on replacing imports in the defense industry, according to a statement on the Kremlin’s website.
Russia also signaled possible retaliation, announcing that it may ban imports of chicken from the U.S. and fruit from Europe because of concern about contamination. Russia was the second-largest market, after Mexico, for American chicken last year, according to the USA Poultry & Egg Export Council, accounting for about 7 percent of U.S. poultry exports.
Russia has moved more troops to Ukraine’s border and continued supplying the separatists in an effort to destabilize Ukraine’s government, Blinken said. The U.S. State Department released photos it said were evidence of Russian forces firing artillery and rockets across the border at Ukraine’s army.
Russia denies involvement in Ukraine’s crisis, in which pro-Kremlin insurgents are facing off against government troops, and repeated calls yesterday for a cease-fire.

‘Strategic Decision’

Putin “has to make a strategic decision,” Blinken said. “We’ve seen him on a regular basis pull back tactically, say the right things in public while he’s doing the wrong things behind the scenes.”
Russia broke its obligations under a 1987 Intermediate-Range Nuclear Forces Treaty related to ground-launched cruise missiles with a range of 300 to 3,400 miles, said the Obama administration official, who asked not to be identified because of the sensitivity of the matter. The violation stemmed from the test of a prohibited missile, according to the New York Times, which reported the U.S. finding yesterday.
One of the demands by the U.S. and the EU is unfettered access to the Malaysian plane crash site in Ukraine’s eastern Donetsk region. The Organization for Security and Cooperation in Europe said today via Twitter that “intensive planning” is underway to access the area, which is being patrolled by armed insurgents.
Experts from the OSCE and representatives of the Netherlands and Australia, whose citizens died in the crash, failed for a second day to reach the crash site because of fighting between Ukrainian forces and rebels. Forensic workers returned to Donetsk “due to security reasons,” the OSCE said.

Army Push

Dmitriy Gau, a spokesman for the self-proclaimed Donetsk People’s Republic, said yesterday that the crash site is under their control. While the rebels aren’t hindering the international mission, the group turned back after seeing fighting nearby, Gau said.
Ukrainian government troops entered the towns of Torez, near where Flight MH17 crashed, and Shakhtarsk, in a push to encircle the pro-Russian rebels holed up in Donetsk and Horlivka, the Defense Ministry in Kiev said on its website.
Ukrainian forces have surrounded Horlivka, a city about 40 kilometers (25 miles) northeast of the regional capital of Donetsk where insurgents retreated after abandoning other positions this month, the Defense Ministry in Kiev said.
Five civilians were killed and eight were wounded amid fighting in the neighboring Luhansk region overnight, the Luhansk City Council said on its website.