U.S., Europe hit Russia with new sanctions

The United States and the European Union hit Russia with new sanctions Tuesday, as they escalated a major diplomatic battle with Russian President Vladimir Putin.

The new penalties are designed to "increase the pressure on Russia" to stop support of separatist violence in Ukraine, President Obama said at the White House.

The Treasury Department released a list of Russian banks that are blocked from transactions with Americans, including the Bank of Moscow, the Russian Agricultural Bank and VTB Bank, one of the largest in Russia.

Obama made his announcement shortly after the European Union unveiled its new sanctions package, one that "will limit access to EU capital markets for Russian State-owned financial institutions, (and) impose an embargo on trade in arms," according to a statement.

While previous sanctions have focused on specific businesses and individuals, the new set is designed to hit sectors that are foundations of the Russian economy, including oil and gas supplies and technology, banking and finance, and arms sales. Close associates of Putin are also targeted.

The EU also said new penalties would "establish an export ban for dual use goods for military end users, and curtail Russian access to sensitive technologies particularly in the field of the oil sector."

Previous sanctions had been more symbolic in nature, and "were sort of the bare minimum the EU had to do in order to pass the laugh test," said Mark Dubowitz, an analyst at the Foundation for Defense of Democracies. "These start moving into sectors of the Russian economy."

The new sanctions mark a sharp spike in long-term tension between the United States and Russia, perhaps the worst since the end of the Cold War more than two decades ago.

Recent disputes include Russian political asylum for NSA leaker Edward Snowden, Russia occupation and annexation of Crimea, ongoing violence by pro-Russia separatists in eastern Ukraine, and the recent shoot down of a commercial airliner that killed more than 300 passengers.

"Today, Russia is once again isolating itself from the international community," Obama said at the White House. If Putin does not accept a diplomatic solution, "the costs on Russia will continue to grow," Obama said.

Asked about the prospect of a new "Cold War," Obama rejected the idea. He said this is a distinct case of the United States and allies seeking to block one country from seeking to dominate another.

Obama said the United States and allies will continue to seek access to the remains of the plane, and force a criminal investigation in order to "make sure justice is done."

The new sanctions also come as the Obama administration accuse the Russians of violating a 1987 arms control treaty by testing new long-range missiles.

Nile Gardiner, an analyst at the Heritage Foundation, said the EU sanctions are a change for officials who had been loath to punish Russia because of economic ties. "Attitudes toward Moscow have dramatically hardened following the shooting down of the Malaysian airliner over Ukraine," he said.

But Putin will need to feel stronger pressure before he modifies his behavior, Gardiner said. The West will need to take a broader approach "aimed at isolating Russia internationally," including a strengthening the NATO alliance and "bolder, stronger American leadership."

Global financial firms have warned their clients about the possible financial impacts of new sanctions, which included restrictions on bond sales and other activities by Russian-owned banks.

In announcing new sanctions, the EU cited what it called ongoing Russian support for violent separatists in neighboring Ukraine. They also cited the recent missile strike against the jetliner.

"When the violence created spirals out of control and leads to the killing of almost 300 innocent civilians in their flight from the Netherlands to Malaysia, the situation requires urgent and determined response," said the EU statement.

The sanctions will add to long term pressure on Russia, but will probably not have any immediate impact on Putin's behavior, analysts said.

"Sanctions are something that work in the longer term," said Olga Oliker, an analyst at the Rand Corp. "We don't really have a lot of tools that work in the near term.

Meanwhile, Obama has written Putin a letter saying that tests of a new cruise missile violate the terms of the Intermediate-Range Nuclear Forces treaty.

The INF treaty of 1987 forbids production or testing of a ground-launched cruise missile with a range of 500 to 5,500 kilometers (about 310 to 3,400 miles).

The INF complaint and the new sanctions are the latest moves in U.S.-Russian battles that center largely on violence in Ukraine. Obama and allies say that Russia is improperly aiding pro-Russian separatists operating in eastern Ukraine.

In recent days, the United States and its allies have accused Russia of actually firing weapons into Ukraine. They have also called on Putin to demand that separatists provide access to the remains of the doomed passenger jet.

The U.S. and European allies began sanctioning Russia after it seized and annexed the Crimea region of Russia earlier this year.

Those sanctions "have made a weak Russian economy even weaker," Obama said, and the new sectoral sanctions will make it worse.

Obama discussed possible sanctions in a Monday video conference with the leaders of Germany, France, Italy and the United Kingdom.

Analysts said the new sanctions will make it harder for Russia to raise capital or get credit for European banks. That will add to borrowing costs for Russian firms. "That will be hard on the Russian economy," Oliker said.

Jeffrey Mankoff, a fellow with the Washington-based Center for Strategic and International Studies, said new sanctions could damage the Russian economy. He also said that Putin and Russia appear to have a vested interest in a pro-Russian Ukraine.

"I don't know how Putin backs down and admits defeat," said Mankoff, deputy director of the CSIS Russia and Eurasia Program. "It's a really dangerous situation."

Contributing: John Bacon


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