US, Europe sanctions target Putin's inner circle, EU soul-searching over Russian gas vulnerability

Barack Obama President Barack Obama makes a statement on Ukraine, Thursday, March 20, 2014, on the South Lawn at the White House in Washington before departing for Florida. President Barack Obama said the US is levying a new round of economic sanctions on individuals in Russia, both inside and outside the government, in retaliation for the Kremlin's actions in Ukraine. He also said he has also signed a new executive order that would allow the U.S. to sanction key sectors of the Russian economy.. (AP Photo/Charles Dharapak) Print The Associated Press By The Associated Press The Associated Press on March 20, 2014 at 11:27 PM, updated March 21, 2014 at 12:05 AM View/Post Comments WASHINGTON -- Raising the stakes in an East-West showdown over Ukraine, President Barack Obama on Thursday ordered economic sanctions against nearly two dozen members of Vladimir Putin's inner circle and a major Russian bank that provides them support. He warned that more sweeping penalties against Russia's robust energy sector could follow. Russia retaliated swiftly, imposing entry bans on American lawmakers and senior White House officials, among them Senate Majority Leader Harry Reid, D-Nev., House Speaker John Boehner, R-Ohio, Obama senior adviser Dan Pfeiffer and the president's deputy national security adviser, Ben Rhodes. It's far more than just a U.S.-Russia dispute. European Union leaders said they, too, were ready to close in on Putin's associates, announcing sanctions on 12 more people linked to Russia's annexation of the Crimean Peninsula from Ukraine. That brought the number of people facing EU sanctions to 33. The Western aim is twofold: to ratchet up the costs for Putin's annexation of Crimea and to head off any further Russian military inroads into Ukraine.

"The world is watching with grave concern as Russia has positioned its military in a way that could lead to further incursions into southern and eastern Ukraine," Obama said, speaking from the South Lawn of the White House.

Thursday's volleys deepened the confrontation over Ukraine, a standoff that has become one of the biggest political crises in Europe since the Cold War. Putin, rather than backing off as the West warns of costs, has defiantly moved military forces into Crimea, backed a referendum in which the Crimean people overwhelming voted to join Russia and then signed a treaty formally absorbing the strategically important peninsula into Russia. In Ukraine, pro-Russian forces seized three Ukrainian warships Thursday, and U.S. officials acknowledge privately that there is little chance of Russia giving up Crimea now. The more pressing concern is stopping Putin from pushing into other Ukrainian areas with large ethnic Russian populations. Thousands of Russian troops are currently positioned along Ukraine's eastern border. The Pentagon said Russia's defense minister assured Defense Secretary Chuck Hagel that those forces have no intention of crossing into Ukrainian territory and are only in the region to conduct military exercises. The two men spoke by phone for an hour. The U.S. had received similar assurances from top Kremlin officials, including Foreign Minister Sergey Lavrov, before Russian troops moved into Crimea. The penalties announced Thursday by the U.S. and Europe build on an initial round of narrower sanctions levied earlier this week. While European officials did not immediately release names, the U.S. listed some of Putin's closest associates. Among the 20 individuals sanctioned were Sergei Ivanov, the Russian president's chief of staff, as well as Arkady Rotenberg and Gennady Timchenko, both lifelong Putin friends whose companies have amassed billions of dollars in government contracts. Also sanctioned: Bank Rossiya, a private bank that is owned by Yuri Kovalchuk, who is considered to be Putin's banker. Putin has not been personally targeted by the first two rounds of U.S. sanctions. In fact, American sanctions on heads of state are rare, largely reserved for instances where the U.S. is seeking a change in government leadership. Russians have made light of previous U.S. sanctions on individuals, and targeted American lawmakers reacted In like manner on Thursday. Said Sen. John McCain, R-Ariz.: "I guess this means my spring break in Siberia is off." Obama also signed a new executive order that would allow him to sanction key Russian industries, actions that could have a harsher impact on that country's economy. Senior administration officials said Russia's energy, financial services and metals and mining sectors are among the industries that could be targeted. "Russia must know that further escalation will only isolate it further from the international community," Obama said. The U.S. has so far acted in conjunction with the European Union, Russia's largest trading partner. The EU's close economic ties with Russia gives its penalties more bite, but also leave the alliance more vulnerable if the Kremlin retaliates. The EU did not immediately release the names of those it had targeted Thursday with travel bans and asset freezes. European leaders, meeting in Brussels, also announced plans to scrap an EU-Russia summit scheduled for June. And like Obama, they warned that further provocations by Russia would result in deeper punishments. "We need to prepare to take further steps and we need to do it together," said Swedish Prime Minister Fredrik Reinfeldt. "A strong Europe is the last thing that Putin wants. He wants to split us up." German Chancellor Angela Merkel said that beyond increasing the number of people affected by asset freezes and travel bans -- initially 21 politicians and military commanders -- the leaders would prepare for possible measures at a higher level, which would include economic sanctions and an arms embargo. Russia's economy has already taken a hit during the Crimea crisis. The country's stock market fell 10 percent this month, potentially wiping out billions. Economists have slashed growth forecasts to zero this year, and foreign investors have been pulling money out of Russian banks. The West's dispute with Russia is expected to dominate Obama's trip to Europe next week. He'll chair a hastily arranged meeting of the Group of Seven, pointedly leaving out Russia, which often joins the U.S., Britain, France, Germany, Italy, Canada and Japan to comprise the Group of Eight. Officials said the G-7 leaders will discuss what kind of financial assistance they can provide to the fledgling Ukrainian government. The G-7 nations have also suspended preparations for a G-8 summit that Russia is scheduled to host this summer in Sochi, site of the recently completed Winter Olympics. ================= AFP EU soul-searching over Russian gas vulnerability Brussels (AFP) - Europe's dependency on Russian gas will be at the heart of summit talks starting Thursday as EU leaders weigh up action to match their outrage over Moscow's annexation of Crimea. Over a quarter of the gas used by the European Union comes from Russia and nearly a third of that is piped through Ukraine, making households and industry dependant on Russian goodwill and Ukrainian infrastructure. For a handful of EU countries -- Finland, Poland, Hungary, Slovakia, Bulgaria and the Baltic states -- Russia's state-controlled gas colossus Gazprom is virtually the sole provider. If the EU and Russia were to escalate tit-for-tat sanctions leading all the way to gas supply disruptions, the EU would have a lot to lose -- a point not lost on many European leaders. Slovakia's Prime Minister Robert Fico for instance warned as he headed to the summit that any energy-related embargo "would be lethal to the Slovak economy." However, an escalation of sanctions could hurt the Russians more than the EU. A paper released recently by the Centre for European Policy Studies (CEPS), a Brussels think tank, claimed Moscow was "more dependent on export revenues from its gas than the EU is on gas imports from Russia." The EU takes 53 percent of Russia's annual gas exports, sliding an estimated $24 billion (17 billion euros) into state coffers. According to the Bruegel think tank, any disruption to that cash flow as a result of sanctions from either side could be crippling for both Russia's national budget and Gazprom's bottom-line. - Gas dependency grows - Yet even the threat of a disrupted gas supply could have significant long-term implications for Gazprom if the EU is spooked into finding ways to further reduce its dependance on Russia. That is exactly what happened after the 2009 gas dispute between Russia and Ukraine that resulted in gas shortages across Europe prompted the EU to change policies to diversify its sources of natural gas and better manage its supplies. According to Eurostat, the EU?s bureau of statistics, in 2003 Russian gas accounted for 45 percent of the bloc?s gas imports, but by 2012 that had been cut to 31.9 percent. However the EU will face difficulty reducing it further as domestic supplies from the North Sea begin to decline, North African supplies have been disrupted and Middle East suppliers of liquefied natural gas have turned to more lucrative Asian markets. In fact, according calculations made by AFP based on data from Eurogas, an association of European gas companies, Russia's share in EU gas imports jumped to around 40 percent last year. That reality may firm up the resolve of EU leaders to find alternatives to Russian gas and explain why energy issues are likely to dominate the agenda of this week's Council meeting. A senior diplomatic source at the European Council confirmed that having "greater control" of energy supplies is the leaders' top priority, arguing that "if we don't take action, our dependancy (on Russian gas) will increase up to 80 percent by 2035." - Baltic vulnerability - While many of the EU?s eastern members are susceptible to Russia?s whims in cutting gas supplies, none are more vulnerable than the three Baltic states: Lithuania, Latvia and Estonia. While all three have been EU members since 2004, the natural gas infrastructure in place is a legacy of the Soviet era in which the region was supplied entirely by the state gas monopoly. There are no gas pipelines connecting the Baltic states with the rest of the EU, and in the past Gazprom has used its role as monopoly supplier to throw its weight around. In 2012, the company imposed a dramatic gas price hike on Lithuania, on the grounds that its implementation of EU-mandated reforms of the energy sector could harm Gazprom's interests. Those high energy prices remain in place today, with Lithuania paying between 30 and 40 percent more for Russian natural gas than the EU average, with Estonia and Latvia not far behind. "The EU is taking our concerns seriously, but it is up to us, to our actions, to address this -- we need to find a solution" a senior Baltic diplomat said ahead of the leaders' meeting in Brussels. The problem for the Baltic countries is that to build the required infrastructure takes time, and there are a number of projects slated for EU support which are not yet off the drawing board. But Lithuania in particular is hoping that a floating LNG terminal which will be ready soon will allow it to import natural gas from other sources, meaning it could be resupplied by sea if the Russians were to halt deliveries. Diplomatic sources said Baltic countries are now hoping that the United States will make its increased production of shale gas available to EU markets "as a matter of urgency", while also calling for a faster implementation of EU gas projects ===========================