The Obama administration on Thursday sanctioned several top Russian politicians and key business oligarchs with ties to Vladimir Putin, raising the stakes in a blossoming international crisis and opening the door for targeting Russia’s vital energy sector.
Three days after targeting 11 of Putin’s ideological allies in response to his plans to annex the Crimean peninsula, the White House responded with a new executive order that delegated to the Treasury Department the ability to blacklist individuals and companies in Russia’s financial services, energy, metals and mining, engineering and defense sectors.
“In addition, we are today sanctioning a number of other individuals with substantial resources and influence who provide material support to the Russian leadership, as well as a bank that provides material support to these individuals,” President Barack Obama said in a statement to reporters.
The Treasury Department unveiled visa bans and a financial blacklisting of 16 high-profile political officials, four important business leaders and a Russian bank in St. Petersburg. They’d be denied entry to the United States or access to dollar transactions in the U.S. banking system. Any U.S. assets they might own will be frozen.
Significantly, the president’s executive order was broad enough to potentially target the heads of natural gas giant Gazprom and oil conglomerates Rosneft and Lukoil. Some of the sanctioned Thursday had close business relations with these state-affiliated energy companies. Russia and the United States are jockeying to be the world’s largest oil producer this year.
Putin responded Thursday with tit-for-tat sanctions of his own, banning travel to Russia for nine congressional leaders and critics, including three senior advisers to Obama.
“I guess this means my spring break in Siberia is off, Gazprom stock is lost & secret bank account in Moscow is frozen,” Sen. John McCain, R-Ariz., one of the nine sanctioned, tweeted in glee.
Obama’s executive order allows actions against companies or persons found “to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, any person whose property and interests in property are blocked pursuant to the order.”
That’s a legalistic way of warning away all sorts of companies that now do business, or are considering doing business, with the targeted oligarchs and the cited bank, Bank Rossiya. It potentially makes them financial pariahs and also puts the energy sector on notice.
For the sanctions to be effective, the Obama administration needs similar action from the European Union, whose member states all have companies operating in Russia and who collectively count Russia as their third largest trading partner after the United States and China. U.S. exporters of oilfield equipment and British banks also face potential retaliation from Russia.
The administration expected new European sanctions on Russia as early as Friday, the deadline Russia has given for Ukrainian military personnel in Crimea to withdraw or defect to Russian ranks.
The Ukrainian Parliament on Thursday passed a defiant resolution, saying the country would resist any further incursion by Russia.
But many lawmakers there also had accepted that Crimea, at least for now, was lost, and they waited to see how many, if any, Ukrainian soldiers would follow the government’s order to withdraw. Russia has told Ukrainian soldiers and sailors in Crimea that they are welcomed to join the Russian military, with a substantial increase in pay and pension benefits and a pledge that they can remain in Crimea. The deadline for accepting the offer is Friday.
Outside the Ukraine Parliament, about 50 Ukrainian navy and paratroop veterans rallied, urging that something be done to prevent the Russian land grab. But most knew that there was really nothing to be done, with Russia and its sympathizers in Crimea holding the numerical edge.
“We’re here because we are preparing for the worst,” said Vladimir Voloshyn, one of the veterans.
The highest-profile tycoon targeted by the White House on Thursday was Gennady Timchenko, co-owner of the private global commodity giant Gunvor, which boasts revenues in the range of $80 billion and owns oil refineries in Belgium and Germany.
“Timchenko’s activities in the energy sector have been directly linked to Putin,” the Treasury statement said. “Putin has investments in Gunvor and may have access to Gunvor funds.”
Holding dual Russian-Finnish citizenship, Timchenko lives in Geneva and has long been rumored to have cashed in on ties to Putin.
“He’s one of the five biggest commodity traders in the world. This is really making their business impossible,” said Anders Aslund, a Russia expert and senior fellow at the Peterson Institute for International Economics. “You can’t be a big commodity trader without dealing with the U.S. and U.S. companies.”
Brothers Arkady and Boris Rotenberg were also targeted by Treasury. They’ve grown rich under Putin, enjoying lucrative contracts with Gazprom, the agency said, and during the recently concluded Winter Olympics in Sochi. Boris Rotenberg is known to ordinary Russians as a judo partner of the oft bare-chested Russian president.
Thursday’s move by Obama “clearly upped the ante because he’s gone after people who are much closer to President Putin, and they are much more likely to have major holdings in Western banks,” said Will Pomeranz, deputy director of the Kennan Institute for Advanced Russian Studies at the Woodrow Wilson Center, a think tank. “Clearly that is an important step.”
Yuri Kovalchuk, who the administration said was a personal banker to senior Russian officials and is the largest single shareholder in Bank Rossiya, Russia’s 17th largest bank, was also targeted.
Political figures sanctioned included Sergei Naryshkin, chairman of the Duma, Russia’s parliament; Igor Sergun, head of Russia’s military intelligence service; Sergei Ivanov, chief of staff of Russia’s presidential executive office; and Vladimir Yakunin, chairman of Russia’s state-owned railways.
In response, Russia on Thursday placed travel bans and financial sanctions on House Speaker John Boehner, R-Ohio, Senate Majority Leader Harry Reid, D-Nev., and several other lawmakers. The Russian sanctions also prevent two top national security advisers and Dan Pfeiffer, a senior White House adviser, from traveling in Russia.
That effectively slams the door on U.S. involvement in a G-8 summit of industrialized nations that had been planned for June in Russia. German Chancellor Angela Merkel told her parliament Thursday that the G-8 process has ceased to exist for now and raised prospects for expelling Russia.
The seven members, minus Russia, will meet in The Hague next week to discuss further responses to Russia’s aggressive stance against Ukraine and its ongoing annexation of Crimea.