U.S. widens sanctions, cites Russia's failings on Ukraine

President Barack Obama discusses new sanctions being imposed against Russia for its intervention in Ukraine during a White House news conference Wednesday.
President Barack Obama discusses new sanctions being imposed against Russia for its intervention in Ukraine during a White House news conference Wednesday.

President Barack Obama escalated sanctions against Russia on Wednesday by targeting a series of large banks and energy and defense firms in what officials described as the most punishing measures to date for Moscow's intervention in Ukraine.

While the latest moves do not cut off entire sectors of the Russian economy, as threatened in the past, the administration's actions go significantly further than the financial and travel limits imposed so far on several dozen individuals and their businesses.

The new U.S. actions will bar affected Russian companies from the U.S. debt markets for loans more than 90 days, meaning that they will still be able to conduct day-in, day-out business with overnight loans but will find it harder to finance medium and long-term activity, officials said.

The moves were coordinated with European leaders, who Wednesday also imposed new penalties on Russia. The Europeans, who have a far deeper economic relationship with Russia than the U.S., declined to go as far as the United States, instead focusing on a plan to block loans for new projects in Russia by European investment and development banks.

The EU leaders also asked their foreign ministers to consider targeting people or companies involved in the unrest in Ukraine.

The synchronized actions were arranged during a Tuesday telephone call between Obama and Chancellor Angela Merkel of Germany, who has been the most critical player driving the European response to Russia.

"What we are expecting is that the Russian leadership will see once again that its actions in Ukraine have consequences, including a weakening Russian economy and increasing diplomatic isolation," Obama said as he announced the U.S. penalties from the White House.

Russian President Vladimir Putin said the new sanctions run counter to U.S. national interests because they put American companies that want to operate in Russia at a competitive disadvantage.

At a news conference in Brazil, Putin said through a translator: "They are undermining the positions of their energy companies." He said, "They made one mistake, and now they insist on making another one."

The latest actions reflect a conclusion by U.S. intelligence agencies that Russia has not cut off the flow of fighters and arms across the border to pro-Russia separatists. On Wednesday, the Pentagon said Russia was building up its forces along the Ukraine border again, with 12,000 troops massed there, reflecting a steady increase in recent weeks.

Ukrainian officials also have said they believe that Russia was responsible for the downing of a military transport plane in the rebel stronghold of Luhansk.

In Ukraine on Wednesday, insurgents bade tearful farewells as they loaded their families onto Russia-bound buses and began hunkering down for what they fear will be the next phase in Ukraine's conflict: bloody urban warfare.

While the pro-Russian rebels in Ukraine's east have lost much ground in recent weeks and were driven from their stronghold of Slovyansk, many have regrouped in Donetsk, an industrial city that had a population of 1 million before tens of thousands by some estimates fled in recent weeks for fear of a government siege. The rebels also hold the city of Luhansk.

Despite the government's desire to minimize civilian casualties, Ukraine's forces could find themselves dragged into grueling warfare inside the cities in their battle to hold the country together.

"To respond to this phase ... we evidently must change tactics," said Valeriy Chaly, deputy head of the presidential administration. He refrained from specifying how.

U.N. Security Council spokesman Andrei Lysenko said that in Luhansk, rebels firing artillery at government troops were taking up positions in residential and industrial zones.

Taking the fight into the heart of rebel-held cities would involve a type of combat for which Ukrainian soldiers are not believed to be adequately prepared.

"It's a very complicated strategic task -- not only when it comes to tactics, also in terms of equipment. When rebels are putting missile launchers on school rooftops, what do you do?" said Orysia Lutsevych, a research fellow at Chatham House in London.

Matthew Clements, an analyst with security affairs consultancy HIS, said Ukraine may, instead of entering Donetsk and Luhansk, surround the cities, "cut the separatists off from supplies of fighters and equipment, and undertake gradual operations against the cities and suburbs in an effort to wear the separatists down."

Disrupting supply lines is a particular priority for Kiev as the rebels have lately come into possession of advanced weapons, including tanks and multiple rocket launchers -- hardware that Ukraine and the West say are being supplied by Russia. Russia denies the allegation.

Information for this article was contributed by Peter Leonard, Mstyslav Chernov, Matthew Knight, Julie Pace, John-Thor Dahlburg, Nedra Pickler, Deb Riechmann and Laura Mills of the Associated Press and by Peter Baker of The New York Times.

A Section on 07/17/2014

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