Obama, Europe hit Russia with sanctions

The United States and Europe imposed a new round of sanctions against Russia on Tuesday for its assistance to rebels in eastern Ukraine, who have been blamed for the downing of Malaysia Airlines Flight 17.

“Because we’re closely coordinating our actions with Europe, the sanctions we’re announcing today will have an even bigger bite,” Obama said in a statement from the White House.

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European leaders had long resisted stronger sanctions against Russia, fearing the move could backfire on their own economies and threaten their energy supplies.

But the dramatic crash of the Malaysia Airlines flight — which killed nearly 300 people — put new pressure on the leaders of Britain, France, Germany, and Italy, who spoke with Obama Monday on a video conference call.

The sanctions announced by the European Union limit the access of Russia’s state-owned banks to capital markets, prevent future arms sales to Russia and ban exports of certain goods to Russian military buyers. 

“We are united in our view that the situation in Ukraine ought to be resolved diplomatically,” Obama said.

“We’ve also made it clear, as I have many times, that if Russia continues on its current path, the cost on Russia will continue to grow. Today is a reminder that the United States means what it says.”

The sanctions announced by the United States, meanwhile, target Russia’s state-owned United Shipbuilding Corporation, which constructs navy vessels, and three major Russian banks: VTB Bank, Bank of Moscow and Russian Agricultural Bank. 

The administration also announced limits on exports of equipment for the Russian oil industry to use in future exploration in hard to reach places, such as deep water. 

Despite the ramping up of sanctions, Obama on Tuesday said they do not represent the beginning of a geopolitical stand off with Russia.

“It’s not a new Cold War,” Obama said. “It’s a very specific issue related to Russia’s unwillingness to recognize that Ukraine can chart its own path.” 

Obama also threw cold water on a question about whether the U.S. should also provide arms to Ukraine, as it seeks to beat back the separatist forces.

“The issue, at this point, is not the Ukrainian capacity to outfight the separatists,” Obama said. “They are better armed than the separatists. The issue is: How do we prevent bloodshed in eastern Ukraine? We’re trying to avoid that.”

Administration officials said Obama played a core role in getting the Europeans to agree to the sanctions.

“We have been working on this issue for weeks, if not months now,” a senior administration official said on a call with reporters. “Today, we see that coordinated action that is the result of that leadership by the president.”

The official painted Tuesday’s actions as following through on warnings that the Russian government must either de-escalate the conflict in Ukraine or face the consequences. 

“These are the very powerful sectoral sanctions that you’ve heard us describe for a number of months,” the official said, adding the U.S. will certainly wait to let the actions “sink in” and see if Russia chooses to change course before any possible future actions are taken.

The U.S. has now slapped sanctions on five of the six largest Russian state-owned banks and 30 percent of their assets, administration officials said. 

Without access to dollars and euros, “basically they’re out of business in the longer-term debt market” an official said.

In an intriguing twist on the sanctions, the Export-Import Bank, an agency battling for its life on Capitol Hill, announced that it is suspending deals with Russian companies.

House Financial Services Committee Chairman Jeb Hensarling (R-Texas), a vocal critic of the bank who has balked at reauthorizing its charter, praised the move.

“There is no justifiable reason why the Export-Import Bank should be allowed to continue financing deals that benefit Russian companies, so I’m pleased the president took this action today that I suggested,” Hensarling said. 

Senior administration officials expressed concern with a Russian military buildup on its border with Ukraine, which they said was part of a “continuing pattern.” The U.S. has released satellite images that it says show Russia firing artillery into Ukraine, and this week accused Russia of earlier tests violating a landmark 1987 treaty against certain missile tests.

Obama said the tensions could be defused if Russia changes course.

“There continues to be a better choice,” he said. “The choice of de-escalation, the choice of joining the world in a diplomatic solution to this situation.”

— This story was updated at 6:07 p.m. and 7:35 p.m.