Sanctions will damage Russia if not lifted quickly
MOSCOW (AP) — U.S. and European sanctions against Russia's energy and finance sectors are strong enough to cause deep, long-lasting damage within months unless Moscow persuades the West to repeal them by withdrawing support for Ukrainian insurgents.
The U.S. and European Union released details Wednesday of new sanctions aimed at hurting Russia's economy without doing undue damage to their own trade interests, punishment for alleged Russian support for Ukrainian rebels and Russia's annexation of the Ukrainian peninsula of Crimea.
The sanctions go further than earlier penalties — which had largely targeted individuals — by broadly limiting the trade of weapons and of technology that can be used in the oil and military industries. The EU also put its capital markets off-limits to Russian state-owned banks.
The bloc blacklisted three more companies and eight additional individuals, bringing the total to 95 people and 23 entities that have been hit with EU-wide asset freezes and travel bans. They include three close associates of President Vladimir Putin: his former judo partner Arkady Rotenberg, and the two largest shareholders of Bank Rossiya; Yuri Kovalchuk and Nikolai Shamalov.
Experts said the sanctions wouldn't have a tremendous impact in the short term, but if left in place for months will stifle development in the Russian economy and sap its financial sector. Already, economists have revised downward their predictions for Russian growth this year, with some saying the country will go into recession.
The biggest immediate impact is likely to come from the financial sanctions. U.S. officials said roughly 30 percent of Russia's banking sector assets would now be constrained by sanctions.
In a first sign of concern, Russia's central bank said Wednesday that it would support banks targeted by the penalties.
"State-owned banks are the core of the Russian banking system," said Vladimir Tikhomirov, chief economist at financial services group BCS. He noted the banks are already having trouble raising money. "That would mean their ability to lend to other banks, smaller banks, is going to be more restricted also."
Russian President Vladimir Putin heads the Cabinet meeting in the Novo-Ogaryovo residence, outside Moscow, Russia, Wednesday, July 30, 2014. The meeting focused on measures to encourage Russian companies to pull their assets back from offshores. The United States and the European Union on Tuesday announced a raft of new sanctions against Russian companies and banks over Moscow’s support for separatists in Ukraine.