Could the Latest U.S. Sanctions Hit a Nerve With Putin?

The asset freezes and travel bans of Russian officials are more of the same, but they inch closer to Putin’s own finances.

Russia's President Vladimir Putin chairs a government meeting in his Novo-Ogaryovo residence, outside Moscow on March 5, 2014.
National Journal
Marina Koren
April 28, 2014, 6:26 a.m.

Less than two weeks ago, there was a peace deal. Now, there are sanc­tions.

A re­cent agree­ment reached by dip­lo­mats from the United States, Rus­sia, Ukraine, and the European Uni­on quickly fizzled when Rus­sia did not hold up its end of the bar­gain: pulling back pro-Rus­si­an mil­it­ant groups in east­ern Ukraine.

“Rus­sia has done pre­cisely noth­ing,” a seni­or ad­min­is­tra­tion of­fi­cial said Monday.

Ten­sion in the re­gion con­tin­ues to climb, and on Monday morn­ing the Obama ad­min­is­tra­tion an­nounced an­oth­er round of sanc­tions against Rus­si­an in­di­vidu­als and com­pan­ies.

Sev­en Rus­si­an gov­ern­ment of­fi­cials, in­clud­ing two whom the White House called mem­bers of Rus­si­an Pres­id­ent Vladi­mir Putin’s in­ner circle, will be sanc­tioned with as­set freezes and visa bans. The U.S. will im­pose re­stric­tions on more than a dozen Rus­si­an com­pan­ies and deny ex­port li­censes to any high-tech products that the Rus­si­an mil­it­ary could pur­chase and use.

The ex­ec­ut­ive or­der is the latest in a series of back-and-forth ac­tions that have char­ac­ter­ized the Ukraine crisis: Mo­scow steps up ag­gres­sion in an­oth­er coun­try’s ter­rit­ory, Wash­ing­ton warns, Mo­scow doesn’t back down, Wash­ing­ton im­poses sanc­tions. Some Ukrain­i­an of­fi­cials are say­ing that the U.S. ac­tion is not enough, while mem­bers of Con­gress are ac­tu­ally shout­ing that it isn’t enough.

But this latest col­lec­tion of sanc­tions re­veals that the Obama ad­min­is­tra­tion is inch­ing closer to hit­ting a nerve for Putin. Monday’s roster of sanc­tioned in­di­vidu­als in­cludes Ig­or Sechin, pres­id­ent of the Ros­neft state oil com­pany; Sergey Chemezov, the CEO of stated-owned cor­por­a­tion Rostec; and Gen­nady N. Timchen­ko, part-own­er of com­mod­it­ies trad­ing com­pany Gun­vor Group. These men are some of Putin’s closest al­lies, and Putin — and his money — has long been linked to Gun­vor.

By singling out these in­di­vidu­als, the sanc­tions re­ignite ru­mors of Putin’s secret for­tune, gen­er­ated by in­vest­ments in vari­ous state-run com­pan­ies and eco­nom­ic sec­tors. The Rus­si­an pres­id­ent’s ex­act per­son­al wealth is un­known, but if es­tim­ates of $40 bil­lion to $70 bil­lion are true, the num­bers would make Putin the richest head of state ever. The New York Times‘ Peter Baker ex­plained Sunday:

Now, as the Obama ad­min­is­tra­tion pre­pares to an­nounce an­oth­er round of sanc­tions as early as Monday tar­get­ing Rus­si­ans it con­siders part of Mr. Putin’s fin­an­cial circle, it is send­ing a not-very-subtle mes­sage that it thinks it knows where the Rus­si­an lead­er has his money, and that he could ul­ti­mately be tar­geted dir­ectly or in­dir­ectly.

“It’s something that could be done that would send a very clear sig­nal of tak­ing the gloves off and not just dance around it,” said Juan C. Za­r­ate, a White House coun­terter­ror­ism ad­viser to Pres­id­ent George W. Bush who helped pi­on­eer the gov­ern­ment’s mod­ern fin­an­cial cam­paign tech­niques to choke off ter­ror­ist money.

So far, the Amer­ic­an gov­ern­ment has not im­posed sanc­tions on Mr. Putin him­self, and of­fi­cials said they would not in the short term, reas­on­ing that per­son­ally tar­get­ing a head of state would amount to a “nuc­le­ar” es­cal­a­tion, as sev­er­al put it.

So, work around the head of state. “The goal here is not to go after Mr. Putin, per­son­ally,” Pres­id­ent Obama said dur­ing a press con­fer­ence Sunday in Ma­nila, the Phil­ip­pines. “The goal is to change his cal­cu­lus with re­spect to how the cur­rent ac­tions that he’s en­ga­ging in in Ukraine could have an ad­verse im­pact on the Rus­si­an eco­nomy over the long haul, and to en­cour­age him to ac­tu­ally walk the walk and not just talk the talk when it comes to dip­lo­mat­ic­ally resolv­ing the crisis in Ukraine.”

Seni­or ad­min­is­tra­tion of­fi­cials say the Rus­si­an eco­nomy has taken a hit from earli­er U.S. sanc­tions, and “the im­pact on the Rus­si­an eco­nomy will only grow.” The latest in­stall­ment cer­tainly hits closer to home in the Krem­lin, but, as be­fore, the ac­tions largely send just a sig­nal.

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