U.S. Said to Target Seven Russians, 17 Companies in New Actions

Apr 28, 2014 8:51 am ET

(For more on the Ukraine conflict, see EXT2.)

April 28 (Bloomberg) -- The Obama administration will sanction seven Russians and 17 companies, including some involved in the financial, energy and infrastructure sectors, according to a congressional official briefed on the actions.

President Barack Obama said today in Manila that the U.S. is “moving forward with an expanded list of individuals and companies that will be affected by sanctions. They will remain targeted. It will also focus on some areas of high-tech defense exports to Russia.”

European Union representatives have discussed similar penalties, a European Commission spokeswoman said. The announcements of expanded measures came as Gennady Kernes, the mayor of Ukraine’s second-largest city Kharkiv, was shot in the back and rushed to hospital for surgery. It also followed the seizure of international military inspectors by pro-Russian separatists last week.

In the worst confrontation with the U.S. and its European allies since the Cold War, Russia has started military exercises on Ukraine’s border where the North Atlantic Treaty Organization says Putin is massing about 40,000 troops in a potential preparation for invasion. That conflicts with an April 17 agreement signed in Geneva aimed at solving the standoff, according to U.S. and EU officials.

‘Expanded List’

“Later today, there will be an announcement made, and I can tell you that it builds on the sanctions that are already in place,” Obama told a news conference in the Philippine capital Manila today. “We are going to be moving forward with an expanded list of individuals and companies that will be affected by sanctions. They will remain targeted. It will also focus on some areas of high-tech defense exports to Russia.”

The U.S. list may include people inside Putin’s inner circle such as Alexey Miller, chief executive of gas-export monopoly OAO Gazprom and his deputy Alexander Medvedev, as well as Igor Sechin, CEO of oil company OAO Rosneft, according to people familiar with developments.

Representatives of the 28 EU states met to discuss extending a “stage two” black list, spokeswoman Pia Ahrenkilde Hansen said in Brussels today. German Deputy Foreign Minister Gernot Erler said in an interview on ZDF television yesterday he had “the impression” that the EU would extend visa bans and asset freezes to “maybe another 15 people.”

Asset Freezes

“We’ve already taken action, we’ve already introduced travel bans and asset freezes on certain individuals,” U.K. Chancellor of the Exchequer George Osborne said in Paris after meeting his German, French, Italian and Spanish counterparts. “European countries are discussing further such action today following the statement from the G-7.”

Russia has stoked tensions in Ukraine with “threatening” military maneuvers and by “taking no concrete steps” to implement the Geneva accord, the Group of Seven nations -- the U.S., the U.K., France, Germany, Italy, Canada and Japan -- said in an April 25 statement.

“The goal here is not to go after Mr. Putin personally,” Obama said. “The goal is to change his calculus with respect to how the current actions that he’s engaging in in Ukraine could have an adverse impact on the Russian economy in the long haul and to encourage him to actually walk the walk and not just talk the talk when it comes to diplomatically solving the crisis.”

If the U.S. sees “further Russian aggression” toward Ukraine, it could impose sanctions on specific parts of the economy such as the banking and defense industries, Obama said.

Banks Brace

In the wake of capital outflows, a credit-rating downgrade by Standard & Poor’s last week, and a surprise interest rate increase to 7.5 percent on April 25, Russia’s Micex Index was 0.2 percent lower at 1,278.24 by 15:36 p.m., bringing its loss this year to 15 percent.

The ruble has lost almost 9 percent this year against the dollar, the second-worst performance among 24 emerging currencies tracked by Bloomberg after Argentina’s peso.

Sanctions previously imposed by the U.S., the EU, Canada and other allies targeted a number of Putin’s associates and top officials, as well as St. Petersburg-based OAO Bank Rossiya.

Executives at OAO Gazprombank, Russia’s third-largest lender, are preparing for possible penalties, two people with knowledge of the deliberations said last week, while development lender Vnesheconombank is taking precautions, according to a person familiar with talks at the lender.

Broader Sanctions

Some U.S. officials warn that broader sanctions that affect ordinary Russians and not just the oligarchs around Putin may backfire to the Russian leader’s benefit. Ordinary Russians would probably rally behind Putin and let him blame the U.S. and its allies for the country’s economic woes.

Three officials, all of whom requested anonymity to discuss internal policy deliberations, said financial and other sanctions are unlikely to deter Putin. His goals are to destabilize Ukraine; ensure Russian domination of portions of it, as well as the Transnistria region of Moldova; and make the government in Kiev subservient to his.

China’s government said it didn’t support the penalties.

“We believe that sanctions will not help solve the problem but, on the contrary, escalate the situation,” Chinese Foreign Ministry spokesman Qin Gang said today. “Sanctions will not serve the interests of any party.”

In Kharkiv, doctors were trying to save Kernes’s life after he was shot in the back while riding his bicycle at around noon local time, the city government said in a statement on its website. Kernes was a former supporter of ousted Ukrainian President Viktor Yanukovych. He has supported separatism in the past although has since softened his stance.

Observer Freed

Pro-Russian separatists have continued abducting people in the eastern Ukrainian city of Slovyansk, where they now have 40 hostages, including observers from the Organization for Security and Cooperation in Europe, Ukrainian state security service spokeswoman Maryna Ostapenko said in Kiev today.

Russian servicemen helped organized the abductions, she said, while Germany called the group of as many as 13 taken captive three days ago to be freed. Russia has given “no clear statement” against the separatists holding the observers “against all legal basis and without any reason,” German government spokesman Steffen Seibert said.

OSCE negotiators left Slovyansk with one of the monitors, a Swedish officer, who was released because he is diabetic yesterday, the Russian news agency RIA Novosti reported.

Early this morning, a group of 30 gunmen seized a state security building in the city of Konstantinovka, the press secretary of the Donetsk regional police said by phone. As of yesterday, activists held buildings and are manning checkpoints in 12 cities, Ukraine’s Interior Ministry said in a statement.

--With assistance from Jim Brunsden in Brussels, Nicole Gaouette, David Lerman and Indira A.R. Lakshmanan in Washington, Daryna Krasnolutska in Kiev, Elena Mazneva in Moscow, Mike Harrison and Andrew Atkinson in London, Tony Czuczka and Rainer Buergin in Berlin, Gregory Viscusi in Paris and Phil Mattingly in Manila.