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EU, US Introduce Sanctions on Russia's Largest Banks, Energy and Defense Companies

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A new round of sanctions has been introduced by the European Union and the United States against Russia, targeting the country’s largest banks, energy and defense companies, as well as individuals.

MOSCOW, September 12 (RIA Novosti) - A new round of sanctions has been introduced by the European Union and the United States against Russia, targeting the country’s largest banks, energy and defense companies, as well as individuals.

Building on earlier measures, the sanctions target Russian access to capital markets, ban the sale of dual use equipment to nearly a dozen Russian companies, and add dozens of people to the list of those facing travel and financial restrictions. The new initiative follows on a change of tactics made in July, switching from targeted sanctions against individuals and businesses to measures against entire sectors of the Russian economy.

The EU made their announcement first, stating Friday that sanctions targeting Russia’s finance, energy and defense sectors had come into force.
The EU has restricted several large Russian companies from seeking finance capital on European financial markets, including oil companies Rosneft, Transneft and Gazprom Neft, as well as defense companies Oboronprom, United Aircraft Corporation and Uralvagonzavod. Private and institutional investors cannot lend to Russian oil companies for more than 30 days, purchase or trade bonds, shares and other financial instruments with a term of more than 30 days.

Additionally, the EU banned European companies from providing technical and other assistance to Russian companies in oil exploration and production, specifically in the areas of Arctic Sea drilling and shale oil projects.

The EU banned sales of dual use equipment to nine Russian companies partly or wholly involved in the design and production of military and military machine building equipment, including Kalashnikov Concern, JSC Sirius, OJSC Stankoinstrument, OAO JSC Chemcomposite, JSC Tula Arms Plant, NPK Technologii Maschinostroenia, OAO Wysokototchnye Kompleksi, OAO Almaz Antey, and OAO NPO Bazalt.

Brussels also added 24 people to its list of individuals facing EU travel bans and asset freezes, bringing the total number of individuals subject to sanctions to 119. The most prominent additions include Alexander Zakharchenko and Gennady Tstypkalov, leaders of the self-proclaimed Donetsk and Lugansk People’s Republics, Vladimir Zhirinovsky, outspoken leader of the ultra-nationalist Liberal Democratic Party, and businessman Sergei Chemezov, chairman of the Russian defense company Rostec. A complete list of the people newly added can be found here.

The US followed up the EU’s lead, tightening sanctions against Russia’s banking sector, and expanding sanctions in the energy and defense sectors.
In addition to Sberbank, Russia’s largest bank, the list of targeted financial entities include Vneshekonombank, VTB, Gazprombank, Rosselkhozbank.

Energy companies Transneft, Gazpromneft, Novatek , Rosneft, Lukoil, Surgutneftegaz, and the state defense company Rostec were also targeted.
A senior US official told journalists in a telephone briefing that "the steps we are taking today, and the steps that we've taken to date, alongside our partners in the EU and elsewhere, are taking a serious toll on the Russian economy. At the most basic level, most analysts projected modest growth in the Russian economy this year. But now, most expect that the Russian economy will not grow at all and in fact it may already have tipped into recession."

Both EU and American officials suggested that the sanctions could be reviewed, reevaluated and removed if the situation in Ukraine improves. The American official also noted that "we are prepared to roll back sanctions if Russia and the separatists implement the Minsk agreements in good faith," but added that “we've yet to see real evidence that Russia has ceased its efforts to destabilize Ukraine."

Reacting to the new measures, Russian president Vladimir Putin noted the use of sanctions is ineffective and counterproductive. “We are convinced that using sanctions as an instrument of foreign policy is not effective and never yields any results, even in relation to small countries, not mentioning such a large country as Russia,” Putin noted.

Putin also talked about the potential unintended consequences of the measures, noting that “sanctions always cause certain damage, including to those who use the instrument.”

Russian experts largely concurred with the president’s remarks. A representative of the Center for Analysis of World Arms Trade told RIA Novosti Friday that the sanctions targeting companies “can be counterbalanced by increasing the credit available to this companies via [Russian state banks].”

Referring to defense companies hit by the sanctions, the expert noted that “funds allocated by the government within the State Defense Order for this year and the state arms program up to 2020 will keep the defense companies busy and will shield the enterprises from any influence that the fluctuating Western political climate may have on their economic performance.”

Speaking of the EU sanctions targeting Russian energy companies, analysts polled by RIA Novosti largely agreed that the sanctions will not lead to the collapse of Russia’s oil industry, on the contrary having the potential to encourage the development of local technologies in the field.

Highlighting the targeting of oil companies’ projects in the Arctic, RANEPA University economist Ivan Kapitonov noted that existing oil reserves in Siberia, “which are much easier, more efficient and faster to develop than in the Arctic region, will help stabilize production, and there will be no reduction. Thus, for the next 10 to 15 years land oil reserves will make up for a temporary lack of technology and experience for extraction in the Arctic zone.”

The Russian stock market rebounded Friday after a fall of more than one percent earlier in the weak in reaction to the announcement of the new sanctions. As of 2 pm Moscow time, the RTS index is up 0,37 percent to 1,222 points, and MICEX up 0,79 percent at 2 p.m. Moscow time. Shares of the Russian energy companies Rosneft, Transneft and Lukoil all rose today between 2 and 3 percent.

Despite stocks rallying, the dollar continued its climb against the ruble, trading at 37,64 rubles per dollar at 2 p.m. Moscow time.

Other Russian officials were quick to make their own comments in reaction to the sanctions. Russian Foreign Minister Sergei Lavrov told the Russia-1 television channel that Russia would “react calmly, adequately, primarily proceeding from the need to protect our interests.”

Lavrov criticized the EU and US decision, noting that “making such decisions at a time when, as we hope, the peace process is stabilizing, means choosing a path aimed at undermining the peace process.”

Presidential spokesman Dmitry Peskov noted that the sanctions did not make any sense when considering Russia’s efforts to stop the fighting and to assist in a peace treaty in eastern Ukraine. “We have said on numerous occasions that we do not understand and reject the idea of sanctions imposed earlier, while considering them as illegitimate,” Peskov said.

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