Announcing a new round of measures against individuals close to Russia’s President Vladimir Putin and on one Russian bank, Mr Obama also said that “more severe actions” were being prepared to respond to further escalation.
“The world is watching with grave concern as Russia has positioned its military in a way that could lead to further incursions into southern and eastern Ukraine,” Mr Obama said.
By naming 20 more Russian individuals for the sanctions list, the Obama administration was backing up its pledge to impose “costs” on Russia if it were to move ahead with the process of annexing Crimea. But the real significance behind the announcement was the threat of much tougher economic penalties if Russia intervenes in other parts of Ukraine.
The new sanctions reflect the persistent tension within the administration over how to use economic tools to respond to Russia’s actions. Although senior US officials do not want to give the impression that they are prepared to accept the annexation of Crimea as a fait accompli, their priority has been to try to deter the Kremlin from sending in troops or taking other steps that might destabilise the rest of Ukraine.
While US officials are wary of talking about “red lines”, the underlying assessment of the administration has been that annexation of Crimea will not lead to a long-term breach in relations between the US and Russia, but that further encroachment would take the crisis into a new realm.
Thursday’s sanctions are “meant to send a signal that, if Russia chooses to escalate, key sectors of the Russian economy are going to be in play”, said a senior US official.
Under an executive order signed by Mr Obama on Thursday, the administration now has power to impose trade and other sanctions on Russian industries if the crisis escalates. These include the financial, energy, mining, defence and engineering sectors.
The decision to impose sanctions on Bank Rossiya is also partly a warning shot against the Kremlin. Described by a senior US official as “a crony bank that handles funds for senior Russian officials”, Rossiya is known by financial executives in Moscow as “Putin’s bank” because of its indirect ties to the president.
For the administration, the decision to impose sanctions on Rossiya shows it is prepared to use banking sanctions – one of the most powerful tools it has at its disposal – in order to apply pressure. Under such sanctions, which have been used to great effect against Iran, the US government can block the target bank from doing business with any financial institution that has a presence in the US. This effectively cuts it off from a large part of the international financial system.
“It will be frozen out of the dollar,” said a senior US official. “All the correspondent accounts it has with US financial institutions will be terminated and we will work with our partners both in the government and the private sector around the world to isolate [it].”
In what could become a cycle of tit-for-tat reactions, Russia responded by placing visa bans on a number of US officials and legislators, including the House speaker, John Boehner, and Senator John McCain.
Potentially more worrying for the administration were the comments on Wednesday from Sergei Ryabkov, deputy Russian foreign minister, who warned that Russia could withdraw its co-operation with the US in nuclear talks with Iran if Washington took action against Moscow.
Referring to talks this week in Vienna with Iran that involved Russian and American negotiators, a senior US official said on Thursday that “nothing was any different” in the way Russia behaved.
“Russia has a major interest in preventing nuclear proliferation,” the official said. “They are not involved in the [Iran] process as a favour to us.”
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