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U.S. Officials Predict Sanctions Will Hit Putin Associates Hard

  • Carl Schreck

WASHINGTON -- The United States has slapped fresh sanctions on individuals close to President Vladimir Putin over Russia’s annexation of Ukraine’s Crimea region, penalties that officials and legal experts say could severely restrict the targeted Russians' ability to do business throughout the world.

U.S. President Barack Obama announced the measures, aimed at senior Russian officials, wealthy businessmen in Putin's "inner circle," and Bank Rossiya, which has close ties to Russia's leadership.

"Based on the executive order that I signed in response to Russia's initial intervention in Ukraine, we are imposing sanctions on more senior officials of the Russian government," Obama said. "In addition, we are today sanctioning a number of other individuals with substantial resources and influence who provide material support to the Russian leadership, as well as a bank that provides material support to these individuals."

The administration also vowed that further punitive steps are on the way.

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State Department spokeswoman Jen Psaki warned that "the question at this point is not if we will do more sanctions, it’s when."

Those hit with sanctions include Vladimir Yakunin, the influential head of Russian Railways, oil trader Gennady Timchenko, and Putin’s chief of staff and close associate, Sergei Ivanov, as well as a handful of others.

The U.S. Treasury also sanctioned Bank Rossiya -- among the country's 20 largest banks -- which it called “the personal bank for senior officials of the Russian Federation.”

Its chairman, Yury Kovalchuk, was also placed on the sanctions list.

A senior U.S. administration official told reporters in a call that the named individuals “will be unable to access any U.S. financial services, will find it difficult to transact in the dollar, and I suspect will find it very difficult to transact in Europe and elsewhere, as our partners around the world have demonstrated over time a willingness to also adhere to the sanctions that we are imposing."

Russian officials included in an initial round of U.S. sanctions on March 17 scoffed at that move, saying they had neither any assets in the United States nor any desire to visit the country.

But another senior U.S. official who spoke to journalists by phone after this latest round insisted that the sanctions have teeth.

“People may think that they are a mere wrist slap. I can assure them that they are not,” the official said.

Legal experts said the fresh sanctions could create havoc for the designated individuals as they try to conduct business, particularly when trying to move money around the world.

Douglas McNabb, a Washington-based lawyer specializing in financial sanctions and extradition law, said that "even some banks that don’t have corresponding relations with the U.S. still won’t have anything to do with individuals who have been designated.”

One of the targeted individuals, Timchenko, is a Soviet-born Finnish citizen who until this week was a co-owner of the oil-trading company Gunvor, which has a head office in Geneva and a registered office in Cyprus.

Gunvor issued a statement soon after the announcement saying that in anticipation of "potential economic sanctions," Timchenko on March 19 sold all of his shares in the company to his partner, Swedish businessman Torbjorn Törnqvist.

Last year, Reuters reported that Timchenko had hired Washington lobbyists in a bid to secure funding backed by the U.S. government for a luxury aircraft business.

Though quickly denied by officials at Gunvor, the U.S. Treasury announcement on Thursday asserted that "Putin has investments in Gunvor and may have access to Gunvor funds."

Meanwhile, Bank Rossiya, with about $10 billion in assets, will be effectively shut out of U.S. dollar activities worldwide and have its correspondent relationships with banks across the globe placed under threat, according to Steve Ganis, an expert on financial sanctions with the Boston law firm Mintz Levin.

Obama also announced an executive order signed that enables the U.S. government to introduce sanctions on entire sectors of the Russian economy. A senior administration official said that could include the energy, engineering, financial services, or metals and mining sectors.

“Once those sectors are designated...we will then be able to impose sanctions on specific entities within those sectors,” the official said. “This is a flexible tool that we can use in response to further provocations” -- the official said, citing potential Russian incursions into other areas of Ukraine.

Boston lawyer Ganis said that sanctions on the Russian energy sector could be “quite disruptive” to Russian energy companies but that such sanctions could also affect global markets and create problems for European countries dependent on Russian energy.

A U.S. administration official said Washington is "working actively to prepare additional sanctions under these authorities using their creative breadth to design sanctions that will hurt the entities with...the smallest possible impact on us and our allies."

Obama’s is traveling next week to Europe, where he said he will discuss the Ukrainian situation with the United States' Group of Seven (G7) partners.
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