Putin hits out at new US sanctions targeting major Russian companies

Washington imposes targeted measures against big Russian companies over Ukraine crisis but excludes Gazprom; Europe considers next step

PUBLISHED : Thursday, 17 July, 2014, 11:10pm
UPDATED : Friday, 18 July, 2014, 6:12am

Russian President Vladimir Putin warned of "very serious damage" to the already tattered US-Russia relationship after Washington imposed sanctions on some of Russia's biggest firms for the first time, striking at the heart of Putin's power base over Moscow's failure to curb violence in Ukraine.

"Without any doubt in this case [sanctions] are driving Russian-US relations towards a dead end, [and] are inflicting very serious damage on them," Putin said while on a visit to Brasilia.

"And I am convinced that this will harm the national long-term interests of the American state, the American people," Putin said.

After months of measures that hit only individuals and smaller firms, US President Barack Obama imposed sanctions on Russia's largest oil producer Rosneft, its second-largest gas producer Novatek and its third-largest bank Gazprombank.

Each of the firms are run by Putin allies who became wealthy during his tenure.

"These sanctions are significant," US President Barack Obama said on Wednesday at the White House. "But they are also targeted, designed to have maximum impact on Russia while limiting any spillover effects on American companies or those who are allies."

The sanctions in effect close the firms to medium- and long-term dollar funding. Other targets include Vnesheconombank (VEB), which acts as payment agent for the government, and eight arms firms, including the producer of the Kalashnikov assault rifle.

However, Washington stopped short of freezing the companies' assets, closing off the short-term funding they need for day-to-day operations or stopping US firms doing business with them. EU leaders agreed to blacklist companies and halt lending to public-sector projects in Russia.

Russia's rouble-traded stock market and the rouble itself fell on opening but did not collapse. After stabilising, Rosneft was down around 4.5 per cent and Novatek 7.5 per cent. The MICEX index was off 2.6 per cent.

There was no suggestion of disruption to production by Rosneft, by output the world's biggest oil company listed on a stock exchange.

An actual disruption to such a huge producer could in theory cause a global energy crisis. But there was no sign of one yesterday, with oil prices only fractionally higher.

The latest measures appear designed to restrict the firms' access to investment capital while avoiding any disruption to energy output. Notably, Russia's biggest company, gas export monopoly Gazprom, which supplies around a third of Europe's gas, was not included on the sanctions list.

Still, sanctions can have a strong indirect effect on Russia's economy by forcing companies to reconsider investments there because of future risk.

The new measures mean that Washington has moved far further to punish Russia than its EU allies, who collectively do 10 times as much trade with Russia as the United States. Nevertheless, the European Union also said it was imposing new sanctions and would draw up a list of targets by the end of the month.

The US and the EU acted after travel bans and asset freezes aimed at Putin's inner circle failed to force Russia to meet an ultimatum to end support for separatists in Ukraine's east. Putin has denied fomenting the rebellion even as Russian troops have begun massing anew on Ukraine's border.

Reuters, Bloomberg, Agence France-Presse