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July
16, 2014: President Obama talks about escalating U.S. sanctions against
Russia, at the White House. in Washington, D.C.AP. President Obama on
Wednesday announced new sanctions against Russia for its involvement in
Ukraine and other foreign ...
President Obama on Russian Sanctions
At the White House, the president discussed his administration’s escalated sanctions against Russia.
Publish Date July 16, 2014.
Image CreditStephen Crowley/The New York Times
WASHINGTON
— President Obama imposed a new round of sanctions against Russia on
Wednesday, targeting some of the crown jewels of the country’s
financial, energy and defense industries in what officials described as
the most punishing measures taken to date by the United States in
retaliation for Moscow’s intervention in Ukraine.
The
new actions will, among other things, restrict access to American
capital markets for Russian giants like the Rosneft oil company and
Gazprombank that operate worldwide. While the latest moves did not cut
off entire sectors of the Russian economy, they went significantly
further than the financial and travel limits imposed previously on
several dozen individuals and their businesses.
The
announcement reflected a decision by Mr. Obama to take more stringent
steps than those taken by the United States’ European allies, which have
far deeper economic ties to Russia. Meeting in Brussels, leaders of the
European Union refused to match the American measures and instead
adopted a more tempered plan that blocks new development loans to Russia
and threatens to target more Russian individuals.
The
disparate moves suggested a widening gulf in the response to the crisis
in Ukraine and may dilute the impact of the American actions. But both
sides emphasized their continued solidarity on the basic demands that
Moscow halt the flow of fighters and weapons across the border with
Ukraine, support a cease-fire and help facilitate the release of
hostages held by pro-Russian separatists.
“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 told
reporters in an early-evening appearance in the White House briefing
room.
Russia
quickly denounced the moves and vowed to retaliate. “We condemn those
politicians and bureaucrats who are behind such actions,” Sergei A.
Ryabkov, the deputy foreign minister, told the Interfax news agency. Mr.
Ryabkov said that Moscow would respond with countermeasures that would
be “quite painful and serious.”
The
firms targeted by the capital market restrictions were some of the most
prominent in Russia. Rosneft, owned by the state and headed by a
longtime adviser to President Vladimir V. Putin, is the country’s
largest oil producer.
Gazprombank
is the financial arm of Gazprom, the state-controlled natural gas
giant, which is also headed by a Putin ally. Also targeted were VEB, the
state economic development bank, and Novatek, another natural gas
producer.
The
administration also barred business dealings with eight state-owned
defense firms; four Russian government officials, including an aide to
Mr. Putin and a top official in the Federal Security Service; an oil
shipping facility in Crimea, which Moscow annexed; a pro-Russian
separatist leader; and the rump rebel organizations in the eastern
Ukrainian cities of Donetsk and Luhansk.
The
four banks and energy companies will be barred from future loans with a
maturity of more than 90 days, meaning they will still be able to
conduct day-to-day business with overnight capital but will find
themselves shut out of longer-term equity.
Some
officials and experts said it could raise the cost of borrowing for
Russian firms as they seek other creditors who may be wary of future
American steps.
Gazprombank
has $8.2 billion in debt over 90 days denominated in American dollars,
and while some of that may have come through European or other
institutions, officials said the vast majority of it could not be
financed, cleared and settled without involving participants in the
United States capital markets who would be affected by the new measures.
Mr.
Obama’s actions would not bar the targeted Russian banks or energy
companies from doing business with Americans or seize their property.
Rosneft, for instance, has major joint ventures with ExxonMobil that
will still be permitted. But administration officials pointedly noted
that such moves were still possible if Russia did not back down.
Craig
Pirrong, a professor of finance at the University of Houston, said the
current moves might not have that much impact because the affected
companies could get American dollars elsewhere. “This will constrain to
some degree the size of the capital pool that the sanctioned firms can
access, but not nearly as much as could be,” he said.
Douglas
A. Rediker, a visiting fellow at the Peterson Institute for
International Economics, said the actual exposure to the American
capital market may be small. “But the chilling effect on hitting sizable
banks and energy companies could cause major second thoughts for doing
business and investing far beyond direct U.S. capital market impact,” he
said.
Others
were more skeptical of the political impact. “What happens if this
doesn’t work?” asked Samuel Charap, a senior fellow at the International
Institute for Strategic Studies. The “risks of escalation seem huge,”
he added, “and there’s a question of whether this level of pain makes
losing Ukraine acceptable to Putin. Unlikely, in my view.”
Several
lawmakers from both parties praised Mr. Obama’s move, but some
Republicans called it inadequate. “Limited actions like those announced
today make U.S. threats look hollow,” said Senator Marco Rubio,
Republican of Florida, adding that Mr. Obama was “continuing to avoid
decisive action.”
American
business groups have objected to unilateral sanctions, arguing that
they would only hurt domestic businesses while their European
competitors swooped in.
The
National Association of Manufacturers said it “is disappointed that the
U.S. is fundamentally extending sanctions in increasingly unilateral
ways that will undermine U.S. commercial engagement and reduce the
effectiveness of the measures imposed.”
Mr.
Obama tried to address that concern on Wednesday. “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,” the president said.
The
latest actions reflect a conclusion by American intelligence agencies
that Russia has not cut off the flow of fighters and arms across the
border to pro-Russian separatists.
Ukrainian
officials have said they believe Russia was responsible for the downing
on Monday of a military transport plane in Luhansk, a rebel stronghold.
An
American official briefing reporters on Wednesday said that the plane
was shot down from an altitude of 21,000 feet, and that only a
sophisticated weapons system could do that. “Over the past month, the
flow of heavy weapons and support for separatists from Russia has
actually increased,” the official said.
The
White House summoned European ambassadors on Monday to show them new
intelligence on Russian involvement in the Ukrainian turmoil and press
them to take stronger action.
Mr.
Obama called his British and French counterparts, but the critical call
came Tuesday with Chancellor Angela Merkel of Germany, the driving
force behind Europe’s response to Russia, when the two coordinated the
actions on Wednesday.
In
Brussels, the European Council, which defines the European Union’s
political direction and priorities, told the European Investment Bank to
suspend new financing for projects in Russia and suggested that the
European Bank for Reconstruction and Development follow suit.
The
council also said it would decide by the end of July on a list of
additional sanctions targets, including those “who actively provide
material or financial support to the Russian decision-makers.”
That
language suggested that Europe might next take aim at Russian oligarchs
who are part of Mr. Putin’s ruling clique, a group already penalized by
the Americans but so far spared by the Europeans.
“Of
course, it is a deepening of the economic sanctions,” Ms. Merkel said
after the meeting. Whether it is as much as previously threatened, she
added, “We are entering the economic sphere here.”
Correction: July 16, 2014
Because of an editing error, an earlier version of this article incorrectly reported the date when a military transport plane was downed in Luhansk, Ukraine. It occurred on Monday, not on June 14.
Because of an editing error, an earlier version of this article incorrectly reported the date when a military transport plane was downed in Luhansk, Ukraine. It occurred on Monday, not on June 14.
Peter Baker reported from Washington, and James Kanter from Brussels.
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