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European Officials Approve Tougher Sanctions on Moscow Obama Joins Europe in Expanding Sanctions on Russia
(about 2 hours later)
LONDON — The European Union on Tuesday approved a package of expanded sanctions against Russia over the conflict in eastern Ukraine, where Moscow has been widely accused of supporting separatist rebels. WASHINGTON — President Obama announced expanded sanctions against Russia on Tuesday, just hours after the European Union imposed its most sweeping measures yet penalizing Moscow for its role in supporting separatists in neighboring Ukraine.
The new sanctions target Russia’s state-owned banks, and will restrict sales to Russia of arms, some kinds of technology and some equipment used by the oil industry. European diplomats also drew up a list of people who will face individual sanctions, including at least three close associates of President Vladimir V. Putin of Russia. The latest American actions took aim at more Russian banks and a large defense firm, but they also went further than past moves by blocking future technology sales to Russia’s lucrative oil industry in an effort to inhibit its ability to develop future resources. The measures were meant to largely match those unveiled earlier in the day in Europe.
The sanctions could take effect as soon as Aug. 1, after remaining legal formalities are completed. They include an embargo on all new weapons sales to Russia, though existing deals, including a French contract to supply warships, would not be affected, according to diplomats who spoke on the condition of anonymity Tuesday because the agreement had not yet been formally announced. “Today is a reminder that the United States means what it says and we will rally the international community in standing up for the rights and freedom of people around the world,” Mr. Obama said on the South Lawn.
The sanctions also would affect sales of what are known as dual-use goods, those with both military and civilian applications — but the restrictions would apply only to military buyers, the diplomats said. The carefully orchestrated actions on both sides of the Atlantic were designed to demonstrate solidarity in the face of what American and European officials say has been a stark escalation by Russia in the insurgency in eastern Ukraine. Until now, European leaders have resisted the broader sorts of actions they agreed to on Tuesday and their decision to do so reflected increasing alarm that Russia is not only helping separatists in Ukraine but directly involving itself in the fighting.
They are “meant as a strong warning,” said Herman Van Rompuy, the president of the European Council, in a statement on Tuesday that was joined by José Manuel Barroso, the president of the European Commission. “Destabilizing Ukraine, or any other Eastern European neighboring state, will bring heavy costs,” the statement said.
The Obama administration’s sanctions were intended to largely, though not precisely, match the Europeans. In addition to the oil technology limits, the American decision adds three more banks to the list of those cut off from medium- and long-term capital financing, including VTB Bank, one of the largest in Russia.
The administration added United Shipbuilding Corp., a state-owned firm created by President Vladimir V. Putin of Russia in 2007, to its list of military companies banned from doing business with Americans. Although the United States did not impose an arms embargo as the European Union decided to do, American officials argued that the series of sanctions they have imposed over the last few months on defense firms comes close to achieving the same result.
European governments moved ahead despite concerns that Europe would also pay an economic price for confronting the Kremlin more aggressively. The new sanctions, which are meant to hit significant parts of the Russian economy including its banks and its energy industry, could take effect as soon as Aug. 1, though the necessary legal formalities were likely to take longer to complete, officials said.
Full details of the new European sanctions were not expected to be published until later in the week, but the European Union issued a fact sheet Tuesday afternoon outlining the main points.
Russia’s state-owned banks and development banks, which often raise money in Western financial markets, are a principal target. The sanctions bar European banks or individual investors from buying or trading in new bonds or securities issued by those banks with a maturity longer than 90 days.
The sanctions also impose an embargo on new sales of arms to Russia, or dual-use goods — those with both civilian and military uses — to Russian military buyers. Existing deals, like the French contract to supply Russia with warships, would not be affected, according to diplomats, who spoke on the condition of anonymity Tuesday because the agreement had not yet been formally announced.
Moreover, sales of certain kinds of technology for oil production and exploration in deep water, in shale deposits and in the Arctic would be barred. The sanctions do not affect equipment and technology for natural gas, a sensitive sector because several European nations depend heavily on gas supplies from Russia.
The European Union also approved new sanctions against at least three close Putin associates, diplomats said. The individuals’ names were not immediately available.
The president of Lithuania, Dalia Grybauskaite, welcomed the decision “on a wide range of sanctions on Russia” using her Twitter account. But she expressed unease that France would be able to maintain its naval deal with Moscow. “Unfortunately, nothing to stop the deal of Mistral yet,” she wrote, referring to the class of assault ships involved. Lithuania is one of five European Union states that directly border on Russian territory.The president of Lithuania, Dalia Grybauskaite, welcomed the decision “on a wide range of sanctions on Russia” using her Twitter account. But she expressed unease that France would be able to maintain its naval deal with Moscow. “Unfortunately, nothing to stop the deal of Mistral yet,” she wrote, referring to the class of assault ships involved. Lithuania is one of five European Union states that directly border on Russian territory.
On the financial side, the sanctions would bar individuals or companies in Europe from buying or selling bonds and other securities issued by Russian state-owned and development banks. Those measures could be felt significantly in London, where those securities are extensively traded.
Sales of technology for oil production and exploration in deep water, in shale deposits and in the Arctic would be restricted, but not technology for natural gas. Several European nations depend heavily on gas supplies from Russia.
European governments were moving in lock step with the United States on the new round of sanctions, despite concerns that they would pay an economic price for confronting the Kremlin more aggressively. Obama administration officials said on Tuesday that they expected to announce their own package of new sanctions later in the day or on Wednesday.
Secretary of State John Kerry said at a news conference in Washington that the West would continue to impose sanctions “if that is what we must do,” though he called once again for the separatists in Ukraine to agree to a cease-fire “now, not in the future” and reach a peace agreement that would make sanctions unnecessary. “If Russia continues to go down this path, however, Russia will leave the international community with no choice,” Mr. Kerry said.
A diplomat in Brussels said that four individuals were singled out for sanctions by the European Union: three Russian “oligarchs” who are close to Mr. Putin and one figure from Donetsk, a provincial capital in eastern Ukraine that has been a center of rebel activity. Their names were not immediately known.
The new sanctions seemed likely to escalate a diplomatic confrontation with Russia that is seen as the most serious of the post-Cold War era, and posed a test of the European Union’s ability to act decisively in a foreign policy crisis, especially when its own economic interests are at risk.The new sanctions seemed likely to escalate a diplomatic confrontation with Russia that is seen as the most serious of the post-Cold War era, and posed a test of the European Union’s ability to act decisively in a foreign policy crisis, especially when its own economic interests are at risk.
Though Europe’s commerce with Russia will probably slump because of the sanctions, they are expected to hit Russia more severely, especially the restrictions on Russian banks’ ability to raise money in Europe and the United States. “These sanctions can have quite a substantial chilling effect on the Russian economy,” said Adam Slater, a senior economist at Oxford Economics in London. “That is probably a quite effective way to put pressure on Russia.” Secretary of State John Kerry said at a news conference earlier Tuesday in Washington that the West would continue to impose sanctions “if that is what we must do,” though he called once again for the separatists in Ukraine to agree to a cease-fire “now, not in the future” and reach a peace agreement that would make sanctions unnecessary. “If Russia continues to go down this path, however, Russia will leave the international community with no choice,” Mr. Kerry said.
Mr. Van Rompuy departed from the usual cautious language of European Union declarations, condemning Russia for actions that “cannot be accepted in 21st century Europe,” including “illegal annexation of territory” — a reference to Crimea — “and deliberate destabilization of a neighboring sovereign country.” He also cited “anger and frustration” over the downing of Malaysia Airlines Flight 17 over rebel-held territory last week, “the delays in providing international access to the site of the air crash, the tampering with the remains of the plane, and the disrespectful handling of the deceased.”
Though Europe’s commerce with Russia will probably slump because of the sanctions, the measures are expected to hit Russia more severely, especially the restrictions on Russian banks’ ability to raise money in Europe and the United States. “These sanctions can have quite a substantial chilling effect on the Russian economy,” said Adam Slater, a senior economist at Oxford Economics in London. “That is probably a quite effective way to put pressure on Russia.”
Still, it could take time for the effects to be felt by ordinary Russians, and some analysts expected the Kremlin to shrug them off, at least publicly. “Although the latest sanctions increase the costs for Russia, Russia’s perceived national security interest calculus should not change meaningfully as a result,” analysts at Citigroup said in a note to clients on Tuesday. “If anything, official Russian government statements have emphasized Russia’s capacity for self-reliance.”Still, it could take time for the effects to be felt by ordinary Russians, and some analysts expected the Kremlin to shrug them off, at least publicly. “Although the latest sanctions increase the costs for Russia, Russia’s perceived national security interest calculus should not change meaningfully as a result,” analysts at Citigroup said in a note to clients on Tuesday. “If anything, official Russian government statements have emphasized Russia’s capacity for self-reliance.”
Leaders of the European Union’s four largest economies — Germany, Britain, France and Italy — agreed during a video conference on Monday with President Obama that additional action was necessary after Russia built up its forces along the border with Ukraine. Mr. Kerry reiterated on Tuesday that there was “clear evidence” of artillery and rocket fire into Ukraine from Russia, and that Russia and its “so-called volunteers” were continuing to supply the rebels in Ukraine with fighters and munitions. By contrast, he said, there was “not a shred of evidence” that Russia was making any serious effort to rein in the rebels and resolve the conflict.
Mr. Kerry reiterated on Tuesday that there was “clear evidence” of artillery and rocket fire into Ukraine from Russia and that Russia and its “so-called volunteers” were continuing to supply the rebels in Ukraine with fighters and munitions. By contrast, he said, there was “not a shred of evidence” that Russia was making any serious effort to rein in the rebels and resolve the conflict. Similarly, Mr. Van Rompuy said in his statement that “Russia will find itself increasingly isolated by its own actions,” but that “the European Union remains ready to reverse its decisions and re-engage with Russia when it starts contributing actively and without ambiguities to finding a solution to the Ukrainian crisis.”
Ukrainian military forces have been pushing the pro-Russian separatists back in recent days, amid intensified fighting. The battles have further complicated efforts by a group of international experts and police officials to reach and secure the wreckage of Malaysia Airlines Flight 17, which was shot down over an area near the border that is now a battlefield. The group was prevented again on Tuesday from traveling to the crash site from Donetsk. Even so, Mr. Putin, backed by public opinion at home, has shown no signs of backing down. On Tuesday, before the European sanctions were approved, Moscow reacted tartly to a Japanese announcement of sanctions on individuals deemed to be contributing to instability in eastern Ukraine, calling the measures “unfriendly” and threatening countermeasures, Reuters reported.
The combination of new sanctions, the Ukrainian military offensive and an accusation on Monday by the United States that Russia had violated a landmark arms control treaty has put Mr. Putin under additional international pressure and has threatened to further isolate Moscow from Western Europe, the United States and their allies. In addition, an international court on Monday ordered Russia to pay investors more than $50 billion for the seizure of the now-defunct Yukos oil company a decade ago.
But Mr. Putin, backed by public opinion at home, has shown no signs of backing down. Offering a possible foretaste of potential reprisals against Europe, Moscow reacted tartly on Tuesday to a Japanese announcement of sanctions on individuals deemed to be contributing to instability in eastern Ukraine, calling the measures “unfriendly” and threatening countermeasures, Reuters reported.
“The imposition by Tokyo of new sanctions on Russia inevitably threaten a whole range of bilateral relations, and set them back,” the Foreign Ministry in Moscow said in a statement.“The imposition by Tokyo of new sanctions on Russia inevitably threaten a whole range of bilateral relations, and set them back,” the Foreign Ministry in Moscow said in a statement.
Though the Western allies appeared united over the necessity of confronting Mr. Putin more directly, there were immediate signs of concern that new sanctions could boomerang on Europe, whose economies rely partly on Russian energy supplies and have closer ties to Russia than the United States does, especially in banking and finance, industrial trade and technology and the arms industry. Though the Western allies appeared united over the necessity of confronting Mr. Putin more directly, there were immediate signs of concern that new sanctions could boomerang on Europe, whose economies have closer ties to Russia than the United States does.
In London, the oil giant BP, which owns 19.75 percent of the Russian state oil company Rosneft, warned investors bluntly before the announcement on Tuesday that “any future erosion of our relationship with Rosneft, or the impact of further economic sanctions, could adversely impact our business and strategic objectives in Russia, the level of our income, production and reserves, our investment in Rosneft and our reputation.” BP is the largest foreign investor in Russia. In London, the oil giant BP, which owns 19.75 percent of the Russian state oil company Rosneft, warned investors bluntly before the approval of the sanctions on Tuesday that “any future erosion of our relationship with Rosneft, or the impact of further economic sanctions, could adversely impact our business and strategic objectives in Russia, the level of our income, production and reserves, our investment in Rosneft and our reputation.” BP is the largest foreign investor in Russia.
European companies have been warning for some time that their earnings could suffer because of the conflict in Ukraine, sanctions against Russia and the sputtering of the Russian economy. Deutsche Bank, based in Frankfurt, said that “emerging geopolitical events in Ukraine and the Middle East may impact financial markets and our clients.”European companies have been warning for some time that their earnings could suffer because of the conflict in Ukraine, sanctions against Russia and the sputtering of the Russian economy. Deutsche Bank, based in Frankfurt, said that “emerging geopolitical events in Ukraine and the Middle East may impact financial markets and our clients.”
The European sanctions are also bound to affect a wide range of European companies, including banks in Vienna, industrial equipment makers in Germany and automakers and parts suppliers across the continent. The German Engineering Federation, which represents makers of machine tools and other equipment, said on Tuesday that sales to Russia were down 20 percent in the first five months of 2014, compared with the same period in 2013.The European sanctions are also bound to affect a wide range of European companies, including banks in Vienna, industrial equipment makers in Germany and automakers and parts suppliers across the continent. The German Engineering Federation, which represents makers of machine tools and other equipment, said on Tuesday that sales to Russia were down 20 percent in the first five months of 2014, compared with the same period in 2013.
“Merely the threat of sanctions has led to German machinery makers missing out on contracts,” the organization said in a statement that spoke of “longtime supplier relationships and mutual trust” being destroyed.“Merely the threat of sanctions has led to German machinery makers missing out on contracts,” the organization said in a statement that spoke of “longtime supplier relationships and mutual trust” being destroyed.
Officials in Brussels said that the new sanctions walked a fine line, aiming to make a strong impact on Russia with only a moderate effect on Europe. “My assessment is that this package strikes the right balance,” Herman Van Rompuy, the head of the European Council, told reporters before the ambassadors adopted the package on Tuesday.