For US and Europe, divisions over Russia penalties - KAUZ-TV: Newschannel 6 Now | Wichita Falls, TX

For US and Europe, divisions over Russia penalties

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By JULIE PACE and JOHN-THOR DAHLBURG
Associated Press

WASHINGTON (AP) - The United States and Europe are seeking to maintain a united front against Russia with coordinated announcements of new economic sanctions, but divisions persist over how aggressive the West should be in punishing Moscow for its threatening moves in Ukraine.

The penalties announced by the White House on Wednesday were broad in scope, targeting two major Russian energy firms, a pair of powerful financial institutions, eight weapons makers and four individuals.

Leaders in Europe, which has a far deeper economic relationship with Russia than the U.S. has, were more restrained, ordering investment and development banks on the continent to suspend financing agreements with Moscow. They also asked EU foreign ministers to consider targeting people or companies involved in the unrest in Ukraine - a decision that could affect Russian oligarchs or members of the Kremlin inner circle.

Even the U.S. penalties stopped short of the most stringent actions the West has threatened, which would entail fully cutting off key sectors of Russia's economy. But officials said those steps are still on the table if Russia fails to abide by the West's demands to stop supporting pro-Russian insurgents who have destabilized swaths of eastern Ukraine.

"What we are expecting is that the Russian leadership will see once again that its actions in Ukraine have consequences, including a weakening Russian economy and increasing diplomatic isolation," President Barack Obama said as he announced the U.S. penalties from the White House.

Russian President Vladimir Putin, sounding unperturbed, said the U.S. was only hurting itself by putting American companies that want to operate in Russia at a competitive disadvantage.

At a news conference in Brazil, Putin said through a translator, "They are undermining the positions of their energy companies."

"They made one mistake, and now they insist on making another one," he said.

Obama and Putin discussed the sanctions in a phone call Thursday morning. The White House said the call took place at Moscow's request.

Until now, the U.S. and Europe have limited their sanctions on Europe to travel bans and asset freezes aimed at individuals and entities, including some with close ties to Putin. But those measures have done little to change Putin's calculus, with the Pentagon announcing Wednesday that Russian troops were again massing along the border with Ukraine. In Ukraine itself, pro-Russian rebels in the east have lost much ground but now seem to be hunkering down for what could be extended urban warfare.

Ukraine and the West have accused Russia of fomenting the insurgency by sending troops and weapons across its border with the former Soviet republic, something Moscow denies. The insurgency was sparked by Russia's annexation of the Crimean Peninsula from Ukraine earlier this year.

While Obama has put a premium on responding to the provocations in coordination with Europe, the White House has grown increasingly frustrated with the continent's reluctance to impose sanctions on Russian economic sectors. EU leaders fear such penalties could have negative impacts on their own economies, given their close financial relationships with Russia.

U.S. officials summoned European diplomats to the White House on Monday to discuss the matter and warned that Obama was prepared to take unilateral action if the EU did not take stronger measures during a meeting in Brussels on Wednesday.

After meeting late into the night, the EU said it was asking the European Investment Bank to sign no new financing agreements with Moscow. The EU also agreed to suspend financing of the new European Bank for Reconstruction and Development operations in Russia.

European leaders also signaled for the first time their willingness to go after Russian companies "that are materially or financially supporting actions undermining or threatening Ukraine's sovereignty, territorial integrity and independence." They ordered their foreign ministers to draw up a list of such people or entities by the end of the month.

Lithuanian President Dalia Grybauskaite, whose nation borders Russia, said the EU had to get tougher with Moscow "because if Putin's aggressive policy isn't stopped, he will go further."

The targets of the U.S. sanctions include two major Russian energy firms: Novatek, the country's largest independent natural gas producer; and Rosneft, Russia's largest petroleum company and third-largest natural gas producer. The penalties bar both from getting long-term loans from U.S. entities.

Also targeted were leading Russian financial institutions, the Russian development bank VEB and Gazprombank, the banking arm of Russia's state energy behemoth Gazprom. The sanctions restrict their ability to access U.S. capital markets.

Steven Pifer, the former U.S. ambassador to Ukraine, said the American sanctions will add uncertainty to a Russian economy that has already been showing signs of weakness.

"These are serious sanctions. They target major Russian energy companies and financial institutions," said Pifer, who currently works as an analyst at the Brookings Institution in Washington.

The sanctions were welcomed with muted praise from some Republicans on Capitol Hill, who have contended that Obama's warnings of tougher action have been little more than empty threats.

"While the delay in imposing real costs on Russia has been damaging to U.S. credibility, today's announcement by the administration is definitely a step in the right direction," said Tennessee Sen. Bob Corker, the top Republican on the Foreign Relations Committee.

Also included on Wednesday's sanctions list were four individuals: Putin adviser Igor Shchegolev, Russian State Duma Deputy Speaker Sergei Neverov, Ukrainian separatist leader Aleksandr Borodai and Sergey Beseda, an official with Russia's Federal Security Service, the intelligence agency that replaced the KGB after the collapse of the Soviet Union.

___

Dahlburg reported from Brussels. Associated Press writers Nedra Pickler and Deb Riechmann in Washington and Laura Mills in Moscow contributed to this report.

___

Follow Julie Pace at http://twitter.com/jpaceDC and John-Thor Dahlburg at http://twitter.com/JTDahlburg

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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