Washington, DC (BBN) -The United States prepared Monday to impose sanctions on high-level Russian officials involved in the military occupation of Crimea, as the escalating crisis in Ukraine prompted turmoil in global markets, pounding the Russian ruble and driving up energy prices, reports The New York Times.
The Obama administration suspended military ties to Russia, including exercises, port visits and planning meetings, just a day after calling off trade talks, the online edition of the New York-based newspaper added.
If Moscow does not reverse course, officials said they would ban visas and freeze assets of select Russian officials in the chain of command as well as target state-run financial institutions.
Congressional leaders signaled that they would follow with sanctions of their own, plus quickly approve economic aid for the fragile, new pro-Western government in Ukraine.
The besieged Kiev government said Monday that the Russians had deployed 16,000 troops in the region over the past week and had demanded that Ukrainian forces there surrender within hours or face armed assault.
While Russia denied it had issued any ultimatums, it was clearly moving to strengthen its control over Crimea, the largely Russian-speaking peninsula in southern Ukraine where Moscow has long maintained a military base.
In response to the Russian moves, European leaders indicated Monday that they would go along with limited action like suspending unrelated talks with Moscow and halting arms sales, but they resisted more sweeping efforts to curb commercial activity and investment in Russia.
German officials emphasised the need for diplomacy, while Dutch diplomats ruled out sanctions for now.
A British document photographed by a journalist said the government of Prime Minister David Cameron would not support trade sanctions or block Russian money from the British market.
Without European backing, American officials worry that economic sanctions may not carry enough bite to persuade President Vladimir V Putin of Russia to reverse course in Ukraine.
By itself, the United States is not even among Russia’s top 10 trading partners, with no more than $40 billion in exports and imports exchanged between the two each year.
By contrast, Europe does about $460 billion in business with Russia, giving it far more potential clout, but also exposing it to far more potential risk.
“It’s particularly important for the United States to bring Europe along,” said Julianne Smith, a former national security aide to Vice President Joseph R Biden Jr. “To the extent that the United States tries to put economic pressure on Russian industry, they won’t feel the impact as much as they would if we had Europe standing with us. That’s easier said than done.”
Even without taking action, Western officials hoped the immediate and unscripted reaction of world markets would give Moscow pause.
Russia’s benchmark stock index dropped 9.4 percent and the ruble fell to a record low against the dollar. The Russian central bank took the extraordinary step of raising interest rates by 1.5 percentage points, spending an estimated $20 billion to support the currency.
In his first public comments on the confrontation in three days, President Obama said Monday that he was focused on assembling an economic aid package to shore up the Ukrainian government and asked that Congress make it “the first order of business,” drawing quick endorsements on Capitol Hill.
“What we are also indicating to the Russians,” Obama added, “is that if, in fact, they continue on the current trajectory that they’re on, that we are examining a whole series of steps — economic, diplomatic — that will isolate Russia and will have a negative impact on Russia’s economy and its standing in the world.”
Secretary of State John Kerry’s spokeswoman, Jen Psaki, went even further: “At this point, we’re not just considering sanctions, given the actions Russia is taking.”
Russia responded that it was only protecting its interests and those of Russians in Ukraine.
“Those who try to interpret the situation as an act of aggression, threaten us with sanctions and boycotts, are the same partners who have been consistently and vigorously encouraging the political powers close to them to declare ultimatums and renounce dialogue,” Sergey V Lavrov, the Russian foreign minister, said in a speech in Geneva.
The Pentagon press secretary, Rear Adm John Kirby, said in a statement: “Although the Department of Defence finds value in the military-to-military relationship with the Russian Federation we have developed over the past few years to increase transparency, build understanding and reduce the risk of military miscalculation, we have, in light of recent events in Ukraine, put on hold all military-to-military engagements between the United States and Russia.”
The crisis prompted tense meetings at the United Nations, Nato and the Organisation for Security and Cooperation in Europe.
Nato called its second emergency meeting on Ukraine in response to a request from Poland under Article 4 of the North Atlantic Treaty relating to threats to a member state’s security and independence.
Meeting in Brussels, European Union foreign ministers called on Moscow to return its troops to their bases. They also threatened to freeze visa liberalization and economic cooperation talks and skip a Group of 8 summit meeting to be hosted by Russia in June.
Heads of the European Union governments will meet in emergency session on Thursday to discuss the measures.
But the Europeans made clear they were not yet willing to go as far as the United States in terms of economic strictures at this point. Frank-Walter Steinmeier, the German foreign minister, said that “crisis diplomacy is not a weakness, but it will be more important than ever to not fall into the abyss of military escalation.”
Frans Timmermans, the foreign minister for the Netherlands, the largest Russian export market, told reporters that “sanctions are not in order today but sanctions will become inevitable” if there is no change in Russia’s position.
Visiting Kiev, Britain’s foreign secretary, William Hague, urged Russia to pull back its forces or face “significant costs,” echoing comments made by Obama and Kerry, who was to arrive in Kiev, the Ukrainian capital, on Tuesday.
But a British government document carried by an official near 10 Downing Street in London and photographed by a journalist indicated a resistance to tougher measures.
The document, shown on the BBC, said that Britain should support ways of providing energy to Ukraine “if Russia cuts them off” but that European ministers should “discourage any discussion” of military preparations.
“The UK should not support for now trade sanctions or close London’s financial center to Russians,” the document said.
Russia is effectively the world’s biggest energy supplier, exporting more natural gas than any other country and more oil than any other nation after Saudi Arabia.
Russia is also the biggest exporter of industrial metals and the fifth-biggest consumer market globally.
“The biggest argument for severe economic sanctions not being imposed is that the European countries don’t have much of an alternative to Russian energy supplies,” said Jens Nordvig, the New York-based managing director of currency research at Nomura Holdings Inc.
Several of the biggest Western energy companies have major investments in Russia, including BP and Royal Dutch Shell.
It may also be difficult for Obama to sell sanctions to the American business community if it is being cut off while competitors still have access to Russian markets.
Russia is Pepsi’s second-largest market and a significant market, too, for firms like Boeing, General Motors, John Deere and Procter & Gamble.
ExxonMobil, the largest American oil company, has a joint venture deal with the state-controlled oil company, Rosneft, to explore what may be a very rich Arctic area called the Kara Sea.
ExxonMobil is also working with Rosneft on drilling in the Baltic Sea and on other projects.
But congressional leaders said they would move forward with sanctions as well as aid to Ukraine.
A Senate Foreign Relations Committee bill would use $200 million in aid and loan guarantees to leverage $1 billion in international economic assistance.
An additional $50 million would be steered from existing State Department accounts for electoral administration.
Beyond that, lawmakers are drafting legislation focused on denying visas to members of Putin’s inner circle and denying Russia assistance through the International Monetary Fund. Representative Eric Cantor of Virginia, the majority leader, said House leaders were reviewing measures aimed at “Russian officials, oligarchs and other individuals complicit in Russia’s efforts to invade and interfere with Ukraine’s sovereign affairs.”
BBN/AHS/SI-04Mar14-1:23 pm (BST)