Obama: New Russia sanctions will have ‘an even bigger bite’

President Obama announced a new round of U.S. sanctions on Russia’s banking, arms and energy sectors, the latest step intended to punish Moscow for backing separatist militias in eastern Ukraine.

“Today is a reminder that the United States means what it says,” Obama told reporters at the White House.

“It didn’t have to come to this, it didn’t have to be this way, “ Obama said, adding that Russian president Vladimir Putin had rejected efforts to resolve the situation, instead continuing efforts to turn Ukraine into a “vassal state.”

The standoff over Ukraine is “not a new Cold War,” Obama said, but “no country should have to accept” having a neighbor arm separatist groups on its territory the way Russia has done in Ukraine.

Obama’s comments came shortly after the European Union approved its own package of expanded sanctions, taking a tougher stance after months of resisting measures that could hurt European economies. The EU sanctions target most of Russia’s largest financial institutions, include an arms embargo and bar the sale of advanced technology used in energy exploration.

The United States has been pushing for harsher penalties for months, but Europe agreed only after the downing of Malaysia Airlines Flight 17. Nearly 300 people were killed when a surface-to-air missile downed the commercial airliner.

U.S. officials blame pro-Russia separatists who control the region, as well as Moscow for providing weapons and training to the fighters. Since the crash, Russia has increased its assistance, launched artillery strikes into Ukraine and built up troops along the border, Obama said Tuesday.

The president said he believes the new sanctions will have “an even bigger bite” than those already in place. Russia’s actions in Ukraine have isolated it economically and politically, “setting back decades of progress,” he said.

The new U.S. sanctions add three state-owned banks to the list of targeted Russian financial institutions: VTB Bank OAO, Russian Agricultural Bank and Bank of Moscow. Together, the three banks account for 30% of the Russian banking sector in terms of assets, according to senior administration officials who briefed reporters under rules that do not allow them to be named.

The banks will be barred from issuing any new equity or new debt in U.S. markets, in effect blocking them from accessing medium- or long-term financing in the country, the officials said. They cast the move as a major blow to the Russian banking sector, though not one likely to have a direct effect on average Russian consumers.

Combined with two banks targeted early this month, the U.S. has now hit five of Russia’s six largest banks, the officials said.

The moves are intended to have a “chilling effect” on investment, the officials said. “Essentially Russia is not a very good bet right now for international investors,” said one.

In addition to the banks, the U.S. added a shipbuilding firm to the list of eight defense-technology companies covered by sanctions. United Shipbuilding Corp., a state-owned firm that supplies the Russian navy, and any individuals associated with the company will see their U.S. assets frozen.

On energy, the U.S. and Europe were careful to mitigate the immediate effect on Europe, which is heavily dependent on Russian oil and natural gas. The U.S. barred the export of technology used in the development of deep-water and Arctic offshore drilling and shale projects. But officials emphasized that the restrictions will largely freeze new exploration, while not disrupting projects already under way.

The White House described the sanctions as the sort of maximum penalties the administration and Europe have threatened for months. But U.S. officials acknowledged that it took the crash of the airliner to push Europe to agree.

Officials said that they weren’t confident the new measures would reverse Putin’s strategy, but they offered little indication that they were considering using other levers.

U.S. officials noted they also were working to boost Ukrainian military power and supply financial support to its fragile government. The U.S. has increased its supply of non-lethal aid, such as night-vision goggles, communications equipment and body armor, to the Ukrainian military. A senior administration official said the U.S. continued to have a “longer-term conversation” with the Ukrainians about other military assistance.

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