Written by Lori Chapman-Sifers: A 28-member bloc including the United States has voted to impose tougher new sanctions that specifically target financial, defense and industrial companies within Russia. The body, representing the European Council (EU) members, said it “considers it appropriate to take further restrictive measures in response to Russia’s action destabilizing the situation in Ukraine.”
Banks are included in the dragnet. Sanctions also limit exports of certain high-tech goods.
Russian diplomats are saying there are tight travel bans with 119 individuals currently on the list. The U.S. hopes that the impact of travel restrictions will have a ripple effect within the Russian hierarchy. Also, the tougher sanctions will freeze additional assets.
Russia is the European Union’s third largest trading partner over all. Moscow is critical to European Union’s nations for gas supplies. Russia’s benchmark MICEX was rising in the a.m., and as the news of the sanctions began to hit, the average was down by .07 percent. The Russian ruble fell to an all-time low of 37.51 against the U.S. dollar.
Germany’s position to hold the fiscal line against calls for more intervention are undoubtedly assisting in the overall pressure being asserted by these new sanctions. These current restrictions are designed to severely constrict Russian President Putin’s attempt to replace the semblance of free-market capitalism with state-led development. The impact to Russia’s oil exploration in the Arctic is already being felt. The state controlled banks and financial institutions are being blanketed with restrictions.
This may allow the process of Ukraine being invited into the European Union, which is known as “accession partnership.” The invitation into the Union could prove to be a crucial next step in determining the legitimacy and safety of Ukraine as well as further establishing its financial independence from the Russian Empire.
The Ukrainian president is scheduled to meet with President Obama on September 18 and there is no doubt that this topic will come up. Further, the U.S. has pledged $70 million in aid to the Ukraine.
According to Obama, the U.S. is paying close attention to developments since a cease-fire and agreement was announced in Minsk. Obama further stated that “conclusive evidence that Russia has ceased its efforts to destabilize Ukraine” has not yet been witnessed. He added that sanctions “can be rolled back” but this is contingent on if Russia fully cooperates on the implementation of its commitments. Rolling back sanctions would not be an option if Russia continues to violate international law with acts of aggression in which case Obama stated, “…the costs will continue to rise.”
Ivan Tchakarov, the chief economist for Citigroup in Russia says limiting big Russian banks and other firms to 30-day loans could cause a credit crunch as early as December, when $25.1 billion in Russian foreign corporate debt matures.
With the tighter restrictions taking effect, the desired outcome is a protecting of the global economy while Russia and specifically Putin are pressured and eventually financially crippled.
Russia’s President Putin said, “I don’t even understand what these present sanctions are related to.” He further stated, “Maybe someone does not like that the process has moved toward a peaceful scenario.” In any case, the European Union and the U.S have imposed new and tougher sanctions on Russia and it remains to be seen if Putin will cooperate and cease his aggressive tactics to destabilize the Ukraine.
By Lori Chapman-Sifers