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West Imposes Strong Russian Sanctions  07/30 06:23

   WASHINGTON (AP) -- Citing Russia's stalled growth rate and a flow of foreign 
capital out of Moscow, U.S. and European officials hope a new round of 
sanctions targeting energy and defense entities, as well as major banks, will 
deepen Russia's economic pain even further and force President Vladimir Putin 
to end provocations in Ukraine.

   Roughly 30 percent of Russia's banking sector assets are now constrained by 
U.S. sanctions, Obama administration officials said Tuesday, shortly after 
announcing new penalties. The sanctions target five of Russia's six largest 
state-owned banks and aim to curtail their access to U.S. debt markets.

   The West is also halting future sales to lucrative Russian economic sectors, 
with the U.S. announcing plans to block future technology sales to the oil 
industry and Europe approving an arms embargo. The Europeans also backed 
sanctions Tuesday against state-owned banks and the energy sector, though the 
specific EU targets won't be made public until later in the week.

   Western officials insist the new sanctions will damage an already struggling 
Russian economy. The International Monetary Fund has slashed Russia's growth 
forecast for this year to nearly zero, and the U.S. says more than $100 billion 
in capital is expected to flow out of the country.

   "Russia's actions in Ukraine and the sanctions that we've already imposed 
have made a weak Russian economy even weaker," President Barack Obama said 
Tuesday.

   Yet it remained uncertain whether the tougher penalties would have any 
impact on Russia's actions in Ukraine --- nor was it clear what other actions 
the U.S. and Europe were willing to take if the situation remains unchanged. In 
the nearly two weeks since a Malaysia Airlines passenger plane was felled in 
eastern Ukraine, Russia appears to have only deepened its engagement in the 
conflict, with the U.S. and allies warning that Russia was building up troops 
and weaponry along its border with Ukraine.

   The West blames pro-Russian separatists for firing a missile at the jetliner 
and Moscow for supplying the equipment and training needed to take down a 
plane. Nearly 300 people were killed in the attack, including more than 200 
Europeans.

   The shocking incident spurred Europe in particular to impose dramatically 
tougher economic sanctions. Europe has a far stronger economic relationship 
with Russia than the U.S., but until this week, European Union leaders had been 
reluctant to impose harsh penalties in part out of concern about a negative 
impact on their own economies.

   EU President Herman Van Rompuy and the president of the European Commission, 
Jose Manuel Barroso, said the sanctions sent a "strong warning" that Russia's 
destabilization of Ukraine could not be tolerated.

   "When the violence created spirals out of control and leads to the killing 
of almost 300 innocent civilians in their flight from the Netherlands to 
Malaysia, the situation requires urgent and determined response," the two top 
EU officials said in a statement.

   The new EU sanctions put the 28-nation bloc on par with earlier sector 
sanctions announced by the U.S. and in some cases may even exceed the American 
penalties.

   Obama said coordinating Tuesday's actions will ensure that the sanctions 
"will have an even bigger bite."

   Despite the West's escalation of its actions against Russia, Obama said the 
U.S. and Europe were not entering into Soviet-style standoff with Russia.

   "It's not a new cold war," he said in response to a reporter's question.

   The new European penalties placed a ban on the unapproved sale to the 
Russians of technology that has dual military and civilian uses or is 
particularly sensitive, such as advanced equipment used in deep-sea and Arctic 
oil drilling. The EU also approved an arms embargo, though it would not 
restrict past agreements, allowing France to go forward with the delivery of 
two warships to Russia, a deal that has been sharply criticized by the U.S. and 
Britain.

   To restrict Russia's access to Europe's money markets, EU citizens and banks 
will be barred from purchasing certain bonds or stocks issued by state-owned 
Russian banks, according to EU officials.

   The U.S. sanctions target three major Russian banks: the Bank of Moscow, 
Russian Agricultural Bank and VTB Bank, Russia's second largest bank.

   Analysts said the effort was aimed at cutting off access to resources that 
these banks would need to support their own lending operations, an action that 
could weaken economic activity in Russia.

   "This limits the ability of these banks to do new business. That means the 
Russian economy will suffer because the banks will not be able to make as many 
loans," said Sung Won Sohn, an economics professor at the Martin Smith School 
of Business at California State University Channel Islands.

   He said that barring financing from U.S. institutions to these banks likely 
would have a ripple effect. "It is likely that other Western banks and banks in 
Asia will be reluctant to do business with them," Sohn said.

   The U.S. also targeted the St. Petersburg-based United Shipbuilding Corp., a 
defense technologies firm, and was blocking future technology sales to Russia's 
oil industry.


(KA)


 
 
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