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US Sanctions Strike Russia's Top Firms

US, EU to Impose New Sanctions on Russia Over Ukrainei
July 17, 2014 4:09 AM
Fighting between Ukrainian government forces and pro-Russian separatists in eastern Ukraine has intensified over the past week, with Ukraine and Russia blaming each other for cross-border attacks. The United States and the European Union have accused Moscow of not doing its part to help restore peace in the region, and they are planning to strengthen economic sanctions against Moscow. Zlatica Hoke reports.
Watch related video report from VOA's Zlatica Hoke.
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The United States and the European Union imposed new sanctions Wednesday, striking at the heart of Vladimir Putin's powerbase by targeting companies closest to him over Moscow's failure to curb violence in Ukraine.

After months of measures that hit only individuals and smaller firms, Washington imposed sanctions on Russia's largest oil producer Rosneft, its second largest gas producer Novatek and its third largest bank Gazprombank.

The sanctions in effect close the firms to medium- and long-term dollar funding.

The firms are run by the Russian president's allies who have become wealthy during his tenure.

Several U.S. senators praised the Obama administration move.

"Timing is everything in foreign policy. Sanctions are part of an overall strategy," Senator Johnny Isakson told the VOA.

"We have to let Russia know that we fully expect them to withdraw from Ukraine, we expect them to be a better partner with the rest of the free world. And, as time goes by, if they do not do that, then sanctions will ratchet up," Isakson added.

Senator Lindsay Graham agreed, saying the sanctions are a 'good step in the right direction. I hope Europe will follow. We need more [sanctions]."

Russian reaction

The Russian foreign ministry reacted to sanctions in a furious statement: "We do not intend to tolerate blackmail and reserve the right to take retaliatory measures" against the U.S.

Moscow denounced what it called primitive revenge for events in Ukraine and pledged to retaliate.

Putin said the U.S. sanctions would hurt U.S. energy companies and warned that sanctions would inflict "very serious damage" on the already tattered U.S-Russia relationship.

Russian Prime Minister Dmitry Medvedev called the sanctions evil, said they would not “bring anyone to their knees.”

Medvedev in televised remarks said the sanctions are throwing Russia's relations with the West “back to the 1980s” and added that Russia “will have to pay more attention to military and security spending.”

Other targets include Vnesheconombank, VEB, which acts as payment agent for the government, four individuals, and eight arms firms, including the producer of the Kalashnikov assault rifle.

However, Washington stopped short of the more stringent actions the West has threatened, such as freezing the companies' assets, closing off the short-term funding they need for day-to-day operations or stopping U.S. firms doing business with them.

U.S. officials said those steps were still on the table if Russia fails to abide by the West's demands to stop its support for the pro-Russia insurgents who have destabilized eastern Ukraine.

However, several Russian companies were quick to say it was business as usual.

Russia's benchmark MICEX was down 2.9 percent in late afternoon trading Thursday upon news of the sanctions while Russia's biggest oil company, Rosneft, was nearly 5 percent down and second-largest oil producer was trading 9 percent lower.

Milder EU sanctions

Moscow gave a milder response to EU sanctions, with the foreign ministry saying it had "submitted to blackmail from the American administration" and should have "its own voice."

The EU urged the European Investment Bank to sign no new financing agreements with Moscow and was suspending operations in Russia financed by the European Bank for Reconstruction and Development.

European nations collectively do 10 times as much trade with Russia as the United States and depend on Moscow for natural gas. They have not imposed as tough sanctions as the United States.

Nevertheless, the European Union also said it was imposing new sanctions and would draw up a list of targets by the end of the month.

The Moscow-based Association of European Businesses voiced “strong disagreement” on Thursday with new U.S. sanctions on Russia over the Ukraine crisis, saying they would hurt economic growth “not only in Russia.”

“These sanctions are more focused on the partners of the European businesses than on the partners of American companies,” the lobby group said in a statement. 

Ukraine hailed the tougher sanctions, with Western-backed President Petro Poroshenko saying he welcomed the EU moves that involve the European Investment Bank and European Bank of Reconstruction and Development halting finance for projects in Russia.

Ukraine's Prime Minister Arseny Yatseniuk said the simultaneous action by Washington and Brussels showed that Western countries were united in their support for Ukraine.

The sanctions show a new willingness to act by Western countries over a crisis that has escalated in recent weeks. Hundreds of people have died in fighting between Ukrainian troops and heavily armed pro-Russian separatists who have declared independent “People's Republics” in two provinces.

Moscow denies supporting the rebellion, but many of the separatist fighters and their main leaders are from Russia. Kyiv says they have been bringing heavy weapons across the border and that Russia shot down one of its planes on Monday.

Putin, who annexed Ukraine's Crimea peninsula in March and has referred to southern and eastern Ukraine as “new Russia”, had appeared keen in recent weeks to tamp down the worst confrontation with the West since the Cold War, pulling back tens of thousands of troops from the frontier.

But in recent days, Washington and Brussels say, he has again sent some 12,000 troops to the frontier, while keeping the border open to allow rebel fighters and arms to cross.

Michael Bowman contributed to this report from Capitol Hill. Some information for this report provided by Retuers, AP and AFP.

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Comment Sorting
by: Gennady from: Russia, Volga Region
July 17, 2014 10:33 AM
It is hard to disagree with President Putin
– that the latest USA’s sanctions against Russia is blackmail in its most evident form,
- that any sanctions from the West in the last 96 years of Russian history, starting from 1917, never ever yielded expected results. Russia proved to be able to exist without the West for decades. In addition, this time, I hope Russia will survive without American popcorn, corn syrup, chewing gum and chicken legs.
– that the sanctions fireback at the West, the USA including. President Obama, announcing the latest round of sanctions, should have thought twice after the statistics that in the first quarter of 2014 the Quartely growth of the real GDP in the USA was catastrophic and plummeted by -2,9%
I expect that the second quarter will bring the same result.

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