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West seeks to inflict more economic pain on Russia


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.

Obama Says Russia Has 'Failed,' Imposes New Sanctions

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.

Join the discussion

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michaelnel4449 July 30 2014 at 9:36 AM

Where were the sanctions against the USA when America went to war with Iraq? A nation that never attacked us... while Bush/Cheney and fellow criminals made billions off of taxpayer dollars, wrecked the economy and caused untold numbers of dead and wounded civilians... and let's not forget the damage done to our military and their families.

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13 replies
Welcome Justin July 30 2014 at 9:39 AM

It's funny how American media keeps referring to the Russian economy as weak; they are more stable and better off than we are ! Plus, they are more self-sustaining than we have been in decades. None of these sanctions will truly accomplish much; and the IMF is losing its influence, especially now that the BRICS bank is being created.

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9 replies
Welcome Justin July 30 2014 at 9:42 AM

with the U.S. and allies warning that Russia was building up troops and weaponry along its border with Ukraine

We have deployed air forces to Poland, Marines to Romania, and naval vessels to the Black Sea. This buildup would be considered an act of war by anyone. Why are we allowed to build up military forces on Russia's border, yet they are not ? It is their country, they can put them wherever they want, especially considering their is a war going on nearby.

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4 replies
Welcome Justin July 30 2014 at 9:43 AM

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.

Yes, only America and the EU have the right to destabilize Ukraine.

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5 replies
PELUCHECAQ July 30 2014 at 11:03 AM

when is Russia going to put sanctions on the us?

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1 reply
frank.foreman PELUCHECAQ July 31 2014 at 12:56 AM

Right after they finish loading the last load of Russian ****** into a steel seagoing cargo container , bound for the docks at the New York Port Authority. I was going to ask : "don't those ****** come in a can , you can store on your shelves"?

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Leonid July 30 2014 at 11:08 AM

When it comes to foreign policy Obama is completely clueless and I do not remember when anything good came out as a result of his action. Egypt Syria, Iraq, Iran and now Russia. It will take decades co clean this mess.

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4 replies
Welcome Justin July 30 2014 at 9:44 AM

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

Then what is it ?

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3 replies
englishfleck July 30 2014 at 11:24 AM

USA invaded Iraq and to this day has kidnapped and held people in out of sight prisons without charges yet the UN looked the other way and STILL DOES.

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2 replies
catine englishfleck July 30 2014 at 7:18 PM

UN? OMG, they are too busy enjoying
New York and New York enjoys the
monies they bring, so don’t expect
much more.

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David englishfleck July 31 2014 at 12:03 AM

Yes and we are still killing innocents when targeting terrorists with our drones.

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dwtomczyk July 30 2014 at 10:10 AM

with all the coverage russia is getting i'd say they already won.

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2 replies
catine dwtomczyk July 30 2014 at 7:21 PM

Right on! A lot of subliminal messages there
that you might be right.

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frank.foreman dwtomczyk July 31 2014 at 1:01 AM

The sanctions should include travel , or immigration to and from Russia. Try that on for size - as Putin would do such a thing to the US or other countries , if , and when , he so chooses.

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lletraw July 30 2014 at 11:03 AM

As President Eisenhower once said, "Beware of the military industrial complex." Defense contractors make billions from often unnecessary and faulty weapons. Iraq and Afghanistan have bankrupted our economy. Thousands of our young people are killed or maimed.
And now more macho posturing.

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2 replies
catine lletraw July 30 2014 at 7:20 PM

Been better if Ike tried to do something
besides making a statement that , at
this point, with blood flowing rivers.."ours and theirs” sounds hollow, no?

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frank.foreman lletraw July 31 2014 at 12:59 AM

Yeah , like watching the Afghany President admit on international TV that he allows the people to grow , cultivate and produce heroin (and sell it by the 5kg bag on the street like vegetables) - or else the people may revolt (IE : kill them). This is all part of a design to "rescue" their totally (allmost nonexistent) economy.

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