U.S. Sanctions Hit 'Putin's Inner Circle'

What's This?

Russian President Vladimir Putin speaks during a nationally televised question-and-answer session in Moscow on Thursday, April 17, 2014.

Image: RIA Novosti, Alexei Nikolsky, Presidential Press Service/Associated Press

By Brian Ries2014-04-28 16:36:53 UTC

The U.S. Treasury Department announced on Monday that it was imposing targeted sanctions on a number of Russian individuals and businesses in response to the country's continued actions in Ukraine.

"Russia’s dangerous and inflammatory actions against Ukraine are illegal and illegitimate,” Treasury Secretary Jacob J. Lew said in announcing the sanctions.

“Since Russia has refused to follow through on its Geneva commitments, today the United States is following through on its statements — we are imposing additional costs against Russia, including sanctions on individuals in the Russian leadership’s inner circle and 17 entities closely linked to previously sanctioned members of the inner circle.”

The sanctions include a variety of asset freezes, visa bans and a revocation of various export licenses.

President Obama, answering a reporter’s question at a press conference in Manila, said the goal of the sanctions wasn’t to hit Putin directly, but to impact the Russian economy.

“The goal here is not to go after Mr. Putin, personally,” Obama said. “The goal is to change his calculus with respect to how the current actions that he’s engaging in in Ukraine could have an adverse impact on the Russian economy over the long haul, and to encourage him to actually walk the walk and not just talk the talk when it comes to diplomatically resolving the crisis in Ukraine."

If Putin takes those steps, Obama said, "then you can see an election taking place in Ukraine, and you can see the rights of all people inside of Ukraine respected."

The president cautioned that his team doesn't yet know “whether it’s going to work,” and that future sanctions — if it comes to that — could impact sectors like banking or the defense industry.

List of officials who were sanctioned

The Treasury Department released the following list of seven Russian government officials who are targeted in the sanctions:

Oleg Belavantsev was appointed Russia’s Presidential Envoy to Crimea on March 21, 2014, by President Putin.

Sergei Chemezov was appointed by a presidential decree on November 26, 2007 as the Director General of the State Corporation for Promoting Development, Manufacturing and Export of Russian Technologies High-Tech Industrial Products, also known as Rostec. Rostec is a Russian state-owned holding company and has not been sanctioned. Chemezov is a trusted ally of President Putin, whom he has known since the 1980s when they lived in the same apartment complex in East Germany. Sergei Chemezov was one of the Russian Government’s nominees for the Board of Directors of Rosneft, a Russian state-owned oil company. He was selected for the Rosneft Board on June 20, 2013.

Dmitry Kozak is a Deputy Prime Minister of the Russian Federation, a position that he has held since October 2008, and to which he was reappointed by presidential decree in May 2012. Kozak has served in a number of capacities in the Russian Federation since 1999, including as Chief of the Government Staff and Minister of Regional Development.

Evgeniy Murov is the Director of Russia’s Federal Protective Service and an Army General. Murov has worked in Russian state security services since 1971 and became Head and Director of the Federal Protective Service in May 2000.

Aleksei Pushkov has been a Deputy of the State Duma since December 4, 2011. He is also the Chairman of the State Duma Committee on International Affairs.

Igor Sechin is the President and Chairman of the Management Board for Rosneft, Russia’s leading petroleum company, and one of the world’s largest publicly-traded oil companies. Rosneft is a state-owned company and has not been sanctioned. Sechin was formerly the Deputy Prime Minister of the Russian Federation from 2008 until 2012. Additionally, from 2004 until 2008, Sechin was the Deputy Chief of Staff for President Putin. Sechin has shown utter loyalty to Vladimir Putin - a key component to his current standing.

Vyacheslav Volodin is the First Deputy Chief of Staff of the Presidential Executive Office. Russian President Vladimir Putin’s decision to move into Crimea is believed to have been based on consultations with his closest advisors, including Volodin.

List of entities sanctioned

The Treasury Department said the 17 "entities" that were sanctioned were designated "because they are owned or controlled by persons (either individuals or entities) whose property and interests in property are blocked pursuant to E.O. 13661," referring to an executive order signed by President Obama on March 17 blocking property of people who are contributing to the situation in Ukraine.

InvestCapitalBank and SMP Bank are controlled by Arkady and Boris Rotenberg who were designated on March 20, 2014 pursuant to E.O. 13661 for acting for or on behalf of or materially assisting, sponsoring, or providing financial, material, or technological support for, or goods and services to or in support of, a senior official of the Government of the Russian Federation.

Stroygazmontazh (SGM Group) is a gas pipeline construction company owned or controlled by Arkady Rotenberg. Rotenberg created SGM Group in 2008 after acquiring multiple Gazprom contractors.

The Volga Group is being designated for being owned or controlled by Gennaddy Timchenko. Timchenko was designated on March 20, 2014 pursuant to E.O. 13661 for acting for or on behalf of or materially assisting, sponsoring, or providing financial, material, or technological support for, or goods and services to or in support of, a senior official of the Government of the Russian Federation. Timchenko is the sole shareholder of the Volga Group, an investment strategy group that holds interest in a variety of assets on behalf of Timchenko.

Transoil is a Russia-based rail freight operator that specializes in the transportation of oil and oil products. Transoil is designated for being owned or controlled by the Volga Group and Timchenko.

Aquanika (Russkoye Vremya LLC) is a Russia-based mineral water and soft drink company. Aquanika is being designated because it is owned or controlled by the Volga Group and Timchenko. Aquanika produces drinks under several trade names including Aquanika.

Sakhatrans LLC is a transportation company engaged in the construction of the bulk terminal for coal and iron ore exports in Muchka Bay near Vanino in Russia’s far east. Sakhatrans LLC is designated for being owned or controlled by the Volga Group and Timchenko.

Avia Group LLC is involved in ground infrastructure for the Business Aviation Center at Sheremetyevo International Airport in Moscow offering aircraft maintenance services, including aircraft storage and organization support services for flight operations. Avia Group LLC is designated for being owned or controlled by the Volga Group and Timchenko.

Avia Group Nord LLC provides management services for corporate aviation at Pulkovo International Airport in Saint Petersburg, Russia. Avia Group Nord LLC is designated for being owned or controlled by the Volga Group and Timchenko.

Stroytransgaz Holding is a holding company for construction assets. Stroytransgaz Holding is designated for being owned or controlled by the Volga Group and Timchenko.

Stroytransgaz Group is a Russian construction group, comprising a number of business entities that specialize in different aspects of the construction industry. Stroytransgaz Group is designated for being owned or controlled by the Volga Group and Timchenko.

Stroytransgaz OJSC is an electricity construction company. Stroytransgaz OJSC is designated for being owned or controlled by the Stroytransgaz Group, the Volga Group, and Timchenko.

Stroytransgaz-M LLC is an industrial construction company focused on oil, gas, petrochemical, and other civil engineering projects. Stroytransgaz-M LLC is designated for being owned or controlled by the Stroytransgaz Group, the Volga Group, and Timchenko.

Stroytransgaz LLC is an infrastructure construction company. Stroytransgaz LLC is designated for being owned or controlled by the Stroytransgaz Group, the Volga Group, and Timchenko.

The Limited Liability Company Investment Company Abros is owned or controlled by Bank Rossiya. Bank Rossiya was designated on March 20, 2014 pursuant to E.O. 13661 for acting for or on behalf of or materially assisting, sponsoring, or providing financial, material, or technological support for, or goods and services to or in support of, a senior official of the Government of the Russian Federation. Bank Rossiya was also designated for being owned or controlled by Yuri Kovalchuk, who was designated on March 20, 2014 pursuant to E.O. 13661.

CJSC Zest is being designated for being owned or controlled by Bank Rossiya.

JSB Sobinbank is being designated for being owned or controlled by Bank Rossiya.

Impact of sanctions

So far, the U.S. sanctions haven't caused Russia to reverse course in Ukraine.

Russia says Crimea has been annexed (the U.S. does not recognize this, however), troops remain amassed on Ukraine's border, and the country has done "precisely nothing," officials say, to hold up its end of the Geneva agreement.

"We don’t expect there to be an immediate change in Russian policy," a senior U.S. official said Monday morning, but they will serve to impose further economic pain and isolation — and show Russia the "dead end" it is pursuing.

A senior U.S. official says there have been $60 billion in capital that has left Russia this year as a result of Ukraine, exceeding the total from 2013, but Monday's sanctions were likely to have little immediate effect on the Russian economy.

They are, U.S. Senators Bob Corker (R-Tenn.) and Sen. Kelly Ayote (R-NH) say, merely "a slap on the wrist." Senator Dan Coats (R-Ind.) said they were "too little, too late."

The ruble and Russian stocks both were up on Monday morning as the sanctions came in more limited than some had feared.

The sanctions program, which one senior U.S. official described as "scalable," does not impact any major sectors of the Russian economy, and they are still rather limited in scope. They were designed to have little impact on the global economy, sparing a number of European countries that do business with Russian companies — most notably gas.

EU issues sanctions, too

Timed to coincide with the U.S. sanctions, the European Union issued sanctions on 15 additional people "responsible for actions undermining Ukraine's territorial integrity," the EU's press officer for the Foreign Affairs Council Susanne Kiefer said on Monday.

While the names of those sanctions were not known Monday morning, U.S. officials said the targets wouldn't match those on the United States' list. The sanctions still require official approval from the EU's 28 nations, the Associated Press reports, but that is merely a formality and should come within a few hours.

What's next?

"If we move to sectoral sanctions that would have an impact on the global economy and on national economies," a senior U.S. official said on Monday. "I think that everybody recognizes that its important that we do this together in part so theres a shared commitment, but also so one nation isn’t bearing significantly greater share of the burden against other nations with different interests in different sectors."

U.S. officials said, however, that a "trigger" for more "robust" sector-impacting sanctions could be applied if Russia moves troops across the Ukrainian border. While officials do not doubt Russia's hand in eastern Ukraine's destabilization, Russia's military remains on Russian soil — and the U.S. wants to ensure they stay there.

Topics: Politics, US & World, World