Russia faces more sanctions from the U.S. and Europe 

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The United States and Europe have unitedly decided to increase the economic sanctions against Russia since they fear that Moscow might be planning an invasion in Ukraine soon.

After months in which European leaders resisted going as far as the Americans, the two sides settled on a package of measures that would target Russia’s financial, energy and military sectors. In some cases, the Europeans may actually leapfrog beyond what the United States has done, forcing Washington to catch up.

The collaboration suggested a hardening resolve among the allies after the downing of Malaysia Airlines Flight 17 over eastern Ukraine this month. Not only has Moscow not backed down, as some hoped it might, but American, European and Ukrainian officials said Russia had actually accelerated its involvement in Ukraine’s civil war with pro-Russian separatists.

The agreement came during an unusual five-way videoconference involving President Obama and his counterparts from Britain, France, Germany and Italy in advance of a European Union meeting on Tuesday to consider new sanctions on Russia. If the Europeans announce their new measures as expected, Obama administration officials said they planned to follow with their own later in the day or on Wednesday.

“We expect the European Union to take significant additional steps this week, including in key sectors of the Russian economy,” said Antony J. Blinken, Mr. Obama’s deputy national security adviser. “In turn, and in full coordination with Europe, the United States will implement additional measures itself. Our purpose here again is not to punish Russia but to make clear that it must cease its support for the separatists and stop destabilizing Ukraine.”

American officials said Monday that an overt Russian invasion of Ukraine, although still unlikely, appeared more possible than it did just weeks ago. “We’ve seen a significant re-buildup of Russian forces along the border, potentially positioning Russia for a so-called humanitarian or peacekeeping intervention in Ukraine,” Mr. Blinken said.

While criticized at home as not being tough enough on Russia, Mr. Obama has been pressing Europe to stand firmer against Moscow. With their economies far more dependent on energy-rich Russia, the Europeans have until now imposed mainly modest sanctions focused on individuals rather than measures intended to damage the Russian economy. On Monday, they agreed to target a handful more individuals.

But the package to be finalized Tuesday would go much further, matching and in some cases exceeding the actions Mr. Obama took on his own this month in blocking access to medium- and long-term American capital markets for some of Russia’s largest and most global banking and energy companies.

The Europeans plan to impose similar capital-market restrictions on Russian state-owned banks as well as an embargo on future sales of arms and to restrict the sale of equipment that can be used for both civilian and military purposes, according to officials briefed on the discussions. They are also considering limits on technology sales to Russia’s oil industry.

Under their own procedures, the Europeans cannot target individual Russian banks the way the Obama administration has, so the capital-market measures will affect all banks that are majority-owned by the Russian state. The Americans would then try to catch up by targeting more Russian banks. Although there would be some gaps between the two moves, officials said they would work to make sure Russia could not slip through them.

American officials were heartened by the agreement, saying it would frustrate efforts by President Vladimir V. Putin of Russia to drive a wedge between the United States and its allies. The key to the agreement, they said, was Chancellor Angela Merkel of Germany, who dropped her past reluctance and pressed for more assertive moves, which forced the French to go along, and that then forced the Italians to give in.

The new actions come as Russia’s economy is already under enormous pressure exacerbated by the Ukraine crisis, with growth effectively stifled, capital fleeing the country, the ruble stressed and foreign investors increasingly shying away. Whether that will change Mr. Putin’s calculus, however, remained uncertain, and some American officials privately expressed doubt. Indeed, some worried that the escalation, along with Ukraine’s military success on the ground, might push Mr. Putin into a corner in a way that made him less willing to back down.

Moreover, the Europeans still refused to go as far as the Americans wanted. The arms embargo, for instance, will affect only future sales, and will not stop France from completing its delivery of Mistral-class helicopter carriers that has drawn criticism from Washington and elsewhere. Britain remained hesitant to cut off the entire Russian financial industry. And the Germans opposed measures affecting Russian natural gas, on which it relies for energy.

Even so, the European willingness to escalate sanctions reflected a shift in attitude across the 28-member bloc, nowhere more so than among one of the Continent’s most powerful constituencies: German industry. Several prominent German business leaders indicated in recent days that they supported tougher sanctions or were at least resigned to them, giving Ms. Merkel more political leeway.

“In light of the most recent escalation, new sanctions are unavoidable,” Hannes Hesse, executive director of the German Engineering Federation, which represents makers of machinery and heavy equipment, said in a statement. Mr. Hesse said the consequences for some German companies would be “bitter” but acknowledged that diplomatic efforts had largely failed.

Germany’s economic vulnerability may be broader than that of other European nations, reflecting its substantial commerce with Russia and its longstanding position as a bridge between Eastern and Western Europe. Recent surveys show that optimism among German businesses is sagging because of concern about Ukraine, and economists have begun predicting that the economy could stagnate or even shrink.

Until recently, many German businesspeople argued that it was better to engage Russia than to confront Mr. Putin too overtly, and some still do. “Further sanctions raise the price that everyone has to pay for this conflict,” Eckhard Cordes, a former Daimler executive and chairman of the Committee on Eastern European Economic Relations, said last week.

But many business leaders have taken a harder line since the Malaysian airliner went down with 298 aboard. “The behavior of the Russian government in the Ukrainian secession conflict must have noticeable consequences,” Ulrich Grillo, president of the Federation of German Industries, wrote in an article published Monday in Handelsblatt, a financial newspaper.

The shift parallels growing impatience by German political leaders. Christiane Wirtz, spokeswoman for Ms. Merkel, told reporters in Berlin on Monday that “a completely new situation has emerged which makes further measures necessary.” She added, “Only such a substantial package would enable the German government and the E.U. to send a clear, strong signal to Russia.”

In Moscow, Sergey V. Lavrov, the Russian foreign minister, said that while Moscow did not welcome the measures, it had no plans to respond in kind. “We do not want to act tit for tat,” he said, adding that he was sure Russia could overcome any difficulties caused by sanctions. “Maybe,” he said, “we will be even more independent and more confident in our own course.”


Source: NYT

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