Obama Hits Closest Putin Allies With Sanctions

Thursday, 20 Mar 2014 07:59 PM

 

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President Barack Obama raised the stakes in an East-West confrontation over Crimea on Thursday by targeting some of Russian President Vladimir Putin's closest long-time political and business allies with personal sanctions.

The extension of visa bans and asset freezes into Putin's inner circle came as Moscow rushed to consolidate the annexation of the Black Sea peninsula, seized from Ukraine last month, and to boost its military presence in the region.

Russian troops took over three Ukrainian warships in Crimea on Thursday, using stun grenades in one incident, a Ukrainian spokesman said. Kiev also said it had begun withdrawing its border guards, surrounded and outnumbered by Russian forces, from Crimea to the mainland.

The 20 names added to the U.S. blacklist included Kremlin banker Yuri Kovalchuk and his Bank Rossiya, major oil and commodities trader Gennady Timchenko and the brothers Arkady and Boris Rotenberg, linked to big contracts on gas pipelines and at the Sochi Olympics, as well as Putin's chief of staff and his deputy, the head of military intelligence and a railways chief.

Most grew rich after being associated with Putin since the former KGB officer began his ascent to power in the mayor's office of St Petersburg in the 1990s.

In a statement explaining the sanctions, the U.S. Treasury said: "Gennady Timchenko is one of the founders of Gunvor, one of the world's largest independent commodity trading companies involved in the oil and energy markets.

"Timchenko's activities in the energy sector have been directly linked to Putin. Putin has investments in Gunvor and may have access to Gunvor funds."

Putin has denied any link with Gunvor in the past. The Swiss-based oil trading company said in a statement that Putin had no ownership of Gunvor and "any understanding otherwise is fundamentally misinformed and outrageous".

It also said Timchenko, who has Finnish as well as Russian citizenship, had sold his 43 percent stake in Gunvor to its chief executive, Torbjorn Tornqvist, on Wednesday as part of what the company called a "contingency plan".

Moscow reacted by announcing its own sanctions against senior U.S. politicians in retaliation against visa bans and asset freezes imposed by Washington on its citizens, with the Foreign Ministry saying U.S. action would "hit the United States like a boomerang".

European Union leaders were meeting in Brussels to step up their own measures against Russia. Officials said the EU would add up to a dozen names to its sanctions list and cancel a planned EU-Russia summit in Sochi, but it would not go as far as Washington in hitting Putin's money men.

"We will be a step behind the Americans," a senior European diplomat said.

However, EU sources said the leaders were discussing a radical plan to reduce their dependence on Russian energy by agreeing to negotiate gas purchases collectively with Moscow instead of country-by-country.

The EU would also accelerate work to upgrade cross-border energy networks to reduce individual member states' vulnerability to supply cuts, and speed up building new liquefied natural gas import terminals to diversify suppliers.

Leaders were expected to ask the executive European Commission to study further sanctions on trade, finance, arms and energy in case Russia went further into Ukraine or moved to destabilize other former Soviet states, the sources said.

Russian forces took control of Crimea in late February after Moscow-backed Ukrainian President Viktor Yanukovich was toppled by protests sparked by his decision to spurn a trade deal with the EU and seek closer ties with Moscow. The seizure has been mostly bloodless.

People in Crimea voted overwhelmingly to join Russia in a referendum on Sunday which Kiev and the West branded illegal.

Only one member of Russia's State Duma lower house of parliament voted against the annexation treaty on Thursday. The Federation Council upper house will complete the ratification process on Friday.

With Washington trying to tighten the screws on Moscow, Putin told Russian company bosses to bring their assets home to help the nation survive the sanctions and an economic downturn.

In a potentially ominous move, Obama said he had signed a new executive order that clears the way for U.S. sanctions against broad sections of the Russian economy, should Putin's military make moves beyond Crimea and into southern and eastern Ukraine which also have large Russian-speaking populations.

"We're imposing sanctions on more senior officials of the Russian government," he said. "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."

Washington announced a first round of sanctions on Monday against 11 Russians and Ukrainians it said were involved with the Crimean annexation. A U.S. official said the sanctions mean Bank Rossiya — which has $10 billion in assets — would be "frozen out of the dollar".

Those on the Russian list included former presidential candidate Sen. John McCain, Senate majority leader Harry Reid and House of Representatives speaker John Boehner.

Like their Russian counterparts, the U.S. lawmakers laughed off the sanctions or treated them as badge of honor.

McCain laced his response with sarcasm. "I guess this means my spring break in Siberia is off, my Gazprom stock is lost, and my secret bank account in Moscow is frozen," he said in a statement. "Nonetheless, I will never cease my efforts on behalf of the freedom, independence, and territorial integrity of Ukraine, including Crimea."

Obama trumped European leaders for the second time in a week by announcing tougher measures than they were planning just as they sat down to try to resolve their differences on sanctions.

While Poland and former Soviet Baltic states that are now EU members have pushed for a tough line, the main EU powers — Germany, France and Britain — all have strong economic reasons for caution.

German Chancellor Angela Merkel told parliament in Berlin that the 28 EU leaders would show they are ready to ramp up punitive measures in a staged response against Russian officials and move to economic sanctions if Putin went further.

"The EU summit today and tomorrow will make clear that we are ready at any time to introduce phase-3 measures if there is a worsening of the situation," she said.

Some diplomats read her statement as an implicit recognition that Crimea was lost, and that only further steps by Russia to destabilize Ukraine or intervene in other post-Soviet republics would trigger sanctions that could hurt convalescing Western economies as well as Moscow's economy.

Some of Russia's largest companies are registered abroad where they may benefit from lower tax rates but also may enjoy some distance from the Kremlin and feel beyond its reach.

Without referring to the annexation of Crimea or to slowing economic growth, Putin said it would also be in the bosses' interests to support the Russian economy.

"Russian companies should be registered on the territory of our nation, in our country and have a transparent ownership structure," Putin told heads of Russia's largest companies. "I am certain that this is also in your interests."

© 2014 Thomson/Reuters. All rights reserved.

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