Sanc­tions will dam­age Rus­sia if not lifted quickly

The Covington News - - THE WIRE -

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."

(AP Photo/ria Novosti, Alexei Nikolsky, Pres­i­den­tial Press Ser­vice)

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.

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