EUROPEPOLITICS

U.S. issues a new set of sanctions against Russia

SberbankEven as President Obama laid out his strategy for battling the ISIL, the administration prepared for strengthening sanctions against Russia.

On Friday, Office of the Foreign Assets Control (OFAC) of the U.S. Department of Treasury published a list of new sanctions on largest Russian banks, defense firms and energy companies in an effort to further curtail the ability of the Russian state to sustain its military campaign in eastern Ukraine. Among the major companies which will suffer from the sanctions are Russian energy giants Transneft, Lukoil, Gazprom, Gazprom Neft, Surgutneftegas, producer of hi-tech industrial and defense products Rostec and Sberbank of Russia.

What had started with the sanctions on individuals thought to be connected or playing any role in annexation of Crimea to Russia and instigating rebellions in Eastern Ukraine, is now gradually expanding to the institutional level. The initial intent was to force the wealthy Russian nationals – and members of the Russian government – who collaborated with the Russian leadership on destabilization of Ukraine into near-bankruptcy with the hope that it will compel them to act in opposition against President Putin. So far, more than 100 top Russian officials and rebel leaders in Ukraine have been subject to EU and US visa bans and asset freezes, and many had lost substantial amounts of monies and profits in their businesses, yet none have spoken against Moscow’s will to date.

The new sanctions will block support of the West and sale of technology to the Russian oil and gas industry which seeks innovative technologies to assist in offshore exploration in unfriendly waters of the Artic. The big five energy companies – Gazprom, Lukoil, Surgutneftegaz, Transneft and Rosneft will have to do without the assistance of the West. Rosneft had already been listed in the previous set of sanctions both by U.S. and E.U.

The Russian government dismissed the sanctions already downplaying the effects of the sanctions by political adversary. The Russian Foreign Ministry issued a statement declaring that the sanctions appear to be a “hostile step” which would put sides on “confrontational course.”

Sanctions on energy firms will in the long run downgrade the ability of the energy exporting Russia to collect on profits and pay for its expensive military campaign in Ukraine, although Russia still maintains it has nothing to do with the rebels in Ukraine who are ostensibly acting on their own. This will also complement the possible public discontent within Russia itself as President Putin has already imposed sanctions on some food imports from the United States and E.U. leading to increase in market prices both in Russia and neighboring states – Moscow substitutes the Western products with increased imports from post-Soviet countries.

It is expected that President Putin will launch his counter-offensive against E.U. as the winter colds will settle in. As it had previously done, Kremlin will use its control over the tap of natural gas pipelines to freeze not only European economies which have cooperated with Washington on opposing Russian policies vis-a-vis Ukraine, but also European citizens.

Putin does not seek to de-jure detach Donbass from Ukraine but intends to create yet another “frozen conflict” in its periphery to keep Kyiv at bay. A ceasefire agreement like those in Transdniestria, South Ossetia, Abkhazia and Nagorno-Karabakh will ensure inability of sovereign government to join any anti-Russian blocs and remain committed to solving its internal matters with Russia’s supervision. Any kind of agreement will have to – in Russia’s view – be signed before warm temperatures hit the Eastern European capitals.

Moscow used its winters against Napoleon and Hitler. It might, as well, use it against the new contemporary adversaries. Question is how likely is the West to remain united to pressure Vladimir Putin into a political defeat?

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