Sanctions target Putin’s inner circle

Raising the stakes in an East-West showdown over Ukraine, President Barack Obama on March 20 ordered economic sanctions against nearly two dozen members of Vladimir Putin’s inner circle and a major Russian bank that provides them support.

The U.S. president warned that more sweeping penalties against Russia’s robust energy sector could follow.

Russia retaliated swiftly, imposing entry bans on American lawmakers and senior White House officials, among them Senate Majority Leader Harry Reid, D-Nev., House Speaker John Boehner, R-Ohio, Obama senior adviser Dan Pfeiffer and the president’s deputy national security adviser, Ben Rhodes.

It’s far more than just a U.S.-Russia dispute. European Union leaders said they, too, were ready to close in on Putin’s associates, announcing sanctions on 12 more people linked to Russia’s annexation of the Crimean Peninsula from Ukraine. That brought the number of people facing EU sanctions to 33.

The Western aim is twofold: to ratchet up the costs for Putin’s annexation of Crimea and to head off any further Russian military inroads into Ukraine.

“The world is watching with grave concern as Russia has positioned its military in a way that could lead to further incursions into southern and eastern Ukraine,” Obama said, speaking from the South Lawn of the White House.

The volleys deepened the confrontation over Ukraine, a standoff that has become one of the biggest political crises in Europe since the Cold War. Putin, rather than backing off as the West warns of costs, has defiantly moved military forces into Crimea, backed a referendum in which the Crimean people overwhelming voted to join Russia and then signed a treaty formally absorbing the strategically important peninsula into Russia.

In Ukraine, pro-Russian forces seized three Ukrainian warships on March 20, and U.S. officials acknowledge privately that there is little chance of Russia giving up Crimea now. The more pressing concern is stopping Putin from pushing into other Ukrainian areas with large ethnic Russian populations. Thousands of Russian troops are currently positioned along Ukraine’s eastern border.

The Pentagon said Russia’s defense minister assured Defense Secretary Chuck Hagel that those forces have no intention of crossing into Ukrainian territory and are only in the region to conduct military exercises. The two men spoke by phone for an hour.

The U.S. had received similar assurances from top Kremlin officials, including Foreign Minister Sergey Lavrov, before Russian troops moved into Crimea.

The penalties announced by the U.S. and Europe build on an initial round of narrower sanctions levied earlier this week. While European officials did not immediately release names, the U.S. listed some of Putin’s closest associates.

Among the 20 individuals sanctioned were Sergei Ivanov, the Russian president’s chief of staff, as well as Arkady Rotenberg and Gennady Timchenko, both lifelong Putin friends whose companies have amassed billions of dollars in government contracts.

Also sanctioned: Bank Rossiya, a private bank that is owned by Yuri Kovalchuk, who is considered to be Putin’s banker.

Putin has not been personally targeted by the first two rounds of U.S. sanctions. In fact, American sanctions on heads of state are rare, largely reserved for instances where the U.S. is seeking a change in government leadership.

Russians have made light of previous U.S. sanctions on individuals, and targeted American lawmakers reacted in like manner.

Said Sen. John McCain, R-Ariz.: “I guess this means my spring break in Siberia is off.”

Obama also signed a new executive order that would allow him to sanction key Russian industries, actions that could have a harsher impact on that country’s economy. Senior administration officials said Russia’s energy, financial services and metals and mining sectors are among the industries that could be targeted.

“Russia must know that further escalation will only isolate it further from the international community,” Obama said.

The U.S. has so far acted in conjunction with the European Union, Russia’s largest trading partner. The EU’s close economic ties with Russia gives its penalties more bite, but also leave the alliance more vulnerable if the Kremlin retaliates.

The EU did not immediately release the names of those it had targeted with travel bans and asset freezes. European leaders, meeting in Brussels, also announced plans to scrap an EU-Russia summit scheduled for June. And like Obama, they warned that further provocations by Russia would result in deeper punishments.

“We need to prepare to take further steps and we need to do it together,” said Swedish Prime Minister Fredrik Reinfeldt. “A strong Europe is the last thing that Putin wants. He wants to split us up.”

German Chancellor Angela Merkel said that beyond increasing the number of people affected by asset freezes and travel bans – initially 21 politicians and military commanders – the leaders would prepare for possible measures at a higher level, which would include economic sanctions and an arms embargo.

Russia’s economy has already taken a hit during the Crimea crisis. The country’s stock market fell 10 percent this month, potentially wiping out billions. Economists have slashed growth forecasts to zero this year, and foreign investors have been pulling money out of Russian banks.

The West’s dispute with Russia is expected to dominate Obama’s trip to Europe next week. He’ll chair a hastily arranged meeting of the Group of Seven, pointedly leaving out Russia, which often joins the U.S., Britain, France, Germany, Italy, Canada and Japan to comprise the Group of Eight.

Officials said the G-7 leaders will discuss what kind of financial assistance they can provide to the fledgling Ukrainian government. The G-7 nations have also suspended preparations for a G-8 summit that Russia is scheduled to host this summer in Sochi, site of the recently completed Winter Olympics.