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U.S. and Russia trade sanctions over Crimea

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WASHINGTON — The U.S. and Russian presidents imposed sanctions on each other's top aides and other government officials Thursday as the dispute over Crimea intensified and the White House worried publicly that Moscow might be positioning its military to seize more of Ukraine.

Denouncing Russia's annexation of Crimea, President Obama said the Treasury Department would freeze any U.S. assets of 20 prominent Russians — including several officials close to President Vladimir Putin, some of the country's wealthiest businessmen — and a Moscow bank that gives financial support to the Russian leadership.

Saying the "world is watching with grave concern," Obama also warned that he was prepared to take far harsher measures if Russian troops on maneuvers cross farther into southern or eastern Ukraine. Obama said he had signed an executive order to authorize penalties against "key sectors of the Russian economy" if necessary, warning that those sanctions could be "disruptive to the global economy." Obama has ruled out U.S. military action.

Putin, who has long had a frosty relationship with Obama, responded swiftly by banning nine U.S. lawmakers and White House officials from entering Russia, according to the Russian Foreign Ministry. The list includes House Speaker John A. Boehner (R-Ohio), Senate Majority Leader Harry Reid (D-Nev.), Sen. John McCain (R-Ariz.) and three top Obama aides.

Several of the U.S. lawmakers said they were honored to be singled out, and at least one Russian laughed off the U.S. punishment.

"Proud to be included on a list of those willing to stand against Putin's aggression," Boehner said on Twitter. "I guess this means my spring break in Siberia is off," quipped McCain, who visited Ukraine last week.

The unusual back-and-forth came after the State Duma, the lower house of the Russian parliament, voted 443 to 1 to admit Crimea, defying Western complaints that it was approving what Washington and its allies consider an illegal land grab.

In Crimea, Russian flags flew over captured Ukrainian military bases and ships. Banks were closed. The Ukrainian Defense Ministry in Kiev, the capital, said it was preparing to evacuate an estimated 25,000 military personnel and their families from Crimea. Officials in Kiev and Moscow warned of possible restrictions on visas and trade in goods including gas and livestock.

The Standard & Poor's credit-rating agency downgraded its rating of Russia to "negative," warning of a possible outflow of capital and reduced investment. Whether that will affect Putin's thinking is unclear. Polls show most Russians support his actions so far, and dissent has been limited.

On Monday, Washington and the 28-nation European Union jointly imposed a first round of sanctions, travel bans and asset freezes against about two dozen mid-level Russian and Ukrainian officials.

EU leaders meeting in Brussels on Thursday said they had agreed to blacklist 12 more Russian officials.

In theory, Europe is in a stronger position than America to punish Russia's ruling elite because many of Russia's richest families and institutions own property or investments across the continent.

But Europe is far more reliant on Russian oil and gas, and leaders fear further disruptions to their fragile economies after years of a debilitating regional debt crisis.

German Chancellor Angela Merkel, the continent's most powerful leader, signaled that Berlin was not prepared yet to seek economic and financial sanctions. She has said that might happen if Russia destabilizes regions beyond Crimea — comments widely interpreted to mean eastern and southern Ukraine.

But Merkel said leaders had directed the European Commission to start preparing the ground for them.

Merkel told German lawmakers that the Group of 8 forum, formed when Russia joined seven economically advanced nations, was no longer a viable arrangement. A G-8 summit that was to take place in Sochi, Russia, hosted by Putin, is now on ice.

So is an EU-Russia meeting scheduled for this year, French President Francois Hollande said.

Some political analysts say Putin has banked on the EU putting its commercial interests above principle on Crimea. They describe the Russian leader as skeptical that European leaders are willing to see their economies and their own political fortunes suffer.

Swedish Prime Minister Fredrik Reinfeldt acknowledged those concerns.

"We need to prepare ourselves for different kinds of sanctions, because there is a worry that the provocations in Ukraine will continue and also expand to other parts of Europe," he told reporters in Brussels. "We need to prepare ourselves, and that means, of course, hurting ourselves in a way."

New U.S. sanctions not only target key political and business players close to Putin, but lay the groundwork for much more focused efforts to weaken a major economy with business around the globe.

Treasury Secretary Jacob J. Lew said Obama's executive order provided "far-reaching authority to designate entities and individuals in key sectors of the Russian economy, such as financial services, energy, metals and mining, engineering, and defense and related materiel."

"While a path of de-escalation remains available to Russia, we are prepared to take additional steps to demonstrate that there are costs for violating international law," Lew said.

Samuel Charap, a senior fellow on Russia and Eurasia at the nonpartisan International Institute for Strategic Studies in Washington, compared Obama's executive order to putting major weapons on alert for possible use.

"This is the nuclear option," he said.

Defense Secretary Chuck Hagel spoke for more than an hour with Russia's defense minister, Sergei Shoigu, pressing him to explain Russian troop movements along Ukraine's borders, said Rear Adm. John Kirby, the Pentagon press secretary.

Shoigu offered assurances that Russian troops were "there to conduct exercises only, that they had no intention of crossing the border into Ukraine, and that they would take no aggressive action," Kirby said, describing the conversation as candid and direct.

Hagel is "relying on those assurances," Kirby added. He declined to say how many Russian troops were involved.

Shoigu told Hagel that he did not have a timetable for when the maneuvers would be completed, Kirby said. The call was prompted in part by U.S. concern that Russia had increased its forces along the border, he added.

A senior Obama administration official, briefing reporters on condition of anonymity, said the threat of sanctions against economic sectors was meant to deter Moscow from further incursions into Ukraine.

The other Americans banned from entering Russia are White House aides Caroline Atkinson, Dan Pfeiffer and Ben Rhodes; Sen. Robert Menendez (D-N.J.), who chairs the Senate Foreign Relations Committee; Sen. Mary Landrieu (D-La.); and Sen. Dan Coats (R-Ind.).

The U.S. sanctions target several Russian business tycoons who have profited from their ties to Putin. They include Arkady Rotenberg and Boris Rotenberg, billionaire brothers who senior administration officials say received $7 billion in contracts related to the Winter Olympics in Sochi.

The blacklist also names Yuri Kovalchuk, who is known as Putin's personal banker. He and another Putin aide on the list, Andrei Fursenko, are primary owners of Bank Rossiya. The bank will be cut off from all U.S. business and find it "very difficult" to do business in dollars, the official said.

Sergei Zheleznyak, deputy speaker of the State Duma, said he was honored to make the U.S. list, which he called "laughable and useless."

Government officials, he said, "are prohibited by law to have bank accounts and business assets abroad, and I don't have any real estate abroad either."

kathleen.hennessey@latimes.com

paul.richter@latimes.com

henry.chu@latimes.com

Hennessey and Richter reported from Washington and Chu from London. Times staff writers David S. Cloud and Lisa Mascaro in Washington and Sergei L. Loiko in Moscow contributed to this report.

Copyright © 2014, Los Angeles Times
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