Putin warns that sanctions imposed by the West will create ‘boomerang effect’

The new curbs – including on oil giant Rosneft – ‘will harm the national long-term interests of the American state, the American people’, possibly hinting at reprisals which might include co-operation in space. The EU also imposed a new set of sanctions.

The row came as military sources in Ukraine accused Moscow of redoubling its efforts to assist insurgents on the ground in the east of the country.

‘Russia is helping the terrorists from its side as much as it is able to – with weapons, and personnel, and shelling from its own territory,’ claimed analyst Dmitry Tymchuk today.

He warned of a ‘new phase of Russia’s covert military invasion’ of the Donbas coal mining and industrial region of eastern Ukraine, including serving soldiers.

‘It is they who are once again becoming the backbone of the terrorist groups, and the professionalism of the Russian military itself is responsible for the current meat grinder in Donbas.

‘Local militias are predominantly criminals, drug addicts and other marginals, and would simply be unable to operate serious equipment and weapons coming in from Russia.

‘This is clear to the Kremlin as well, who deploys its militaries to Donbas now.’

Putin in contrast claimed it was in Russia’s interests to end the conflict ‘because we have many friends there, because we have had special relations historically’.

He blamed the West for inspiring the toppling of the former Ukrainian government which had led to the abyss.

‘People who push countries to such developments should never forget that the blood of both soldiers of the regular army, the blood of resistance fighters, civilians is first of all on their hands,’ he said.

‘The tears of mothers, widows, orphans are on their conscience. And they have no moral right to shift that responsibility onto others.’

Denying any role in fuelling the crisis, he warned ‘all parties to the conflict in Ukraine should be urged to immediately stop combat operations and to start talks’.

The West, in contrast, ‘push today’s authorities in Ukraine toward continuation of a fratricidal war and punitive operation.’

‘This policy has no prospects,’ insisted Putin, claiming IMF funds were being pumped into the war effort.

The new sanctions ‘are bound to have a boomerang effect and, in this case, will undoubtedly lead Russian-American relations to a dead end and deal a very serious blow,’ said Putin in Brazil.

Rosneft boss Igor Sechin, a close Putin ally, claimed the US and EU sanctions amounted to a direct assault on the Russian economy.

‘It is an attempt to worsen the economic situation of the Russian people,’ he said.

Yesterday, Obama told his Russian counterpart that he ‘must halt the flow of weapons and fighters’ into Ukraine.

The tough action, in the form of new sanctions on Russia’s lucrative energy and defense companies as well as a handful of Russian banks, was announced by Obama in a half-empty White House press briefing room.

It came as his administration struggled for a way to quell a Moscow-backed insurgency in eastern Ukraine.

The penalties, which Obama said were a response to Russia’s ‘provocations in Ukraine,’ significantly expand on previous U.S. sanctions, which were limited to Russian individuals and companies.

‘Russia must halt the flow of weapons and fighters across the border in Ukraine’ and pursue international talks, Obama said. ‘I’ve made this clear directly to Mr Putin,’ his counterpart in Moscow.

The president said his administration was ‘designating selected sectors of the Russian economy as eligible for sanctions,’ and then applying ‘significant but … also targeted’ sanctions to companies in those sectors.

‘We have to see concrete actions and not just words that Russia is in fact committed to end this conflict along the Russia-Ukraine border,’ he told reporters.

‘There are some clear steps that we’ve asked Russia to take that they haven’t taken,’ White House Press Secretary Josh Earnest told reporters on Wednesday.

‘And that is what has elevated the risk that Russia faces right now as it relates to additional economic costs that could be imposed by the international community,’

U.S. officials said earlier in the day that they were continuing to hold in reserve a strategy that would cripple entire market sectors in Russia, in case Moscow launches a full-scale invasion of Ukraine.

Obama warned that with a new round of financial penalties, ‘what we are expecting is that the Russian leaders will see once again that their actions in Ukraine have consequences.’

The U.S. will continue to help Ukraine ‘defend its territorial integrity,’ he vowed.

Hours earlier, the U.S. Treasury Department listed the Bank for Development and Foreign Economic Affairs, Gazprombank Gas Industry, Rosneft Oil Co. and the Joint Stock Company Military-Industrial Corp among the sanctioned entities.

They are among Russia’s largest business entities, but will no longer be permitted to borrow funds on the American market for medium- and long-term periods of over 90 days, The New York Times reported shortly after a closed White House conference call with journalists.

The companies will still be able to conduct overnight loans and other short-term banking business.

During the same brief press conference, Obama announced that Afghanistan had agreed to abide by the results of an international audit of its recent presidential election.

He added the U.S. continues ‘to support diplomatic efforts to end the violence between Israel and Hamas.’

‘Israel has a right to defend itself from rocket attacks that terrorize the Israeli people,’ Obama declared. ‘There is no country on earth that can be expected to live under a daily barrage of rockets, and I’m proud that the Iron Dome system that Americans helped Israel develop and fund has saved many Israeli lives.’

But he condemned ‘the death and injury of so many innocent civilians in Gaza – men, women and children caught in the crossfire,’ and said he would continue to pursue a diplomatic peace.

Obama also added that he was considering an extension of Friday’s deadline for Iran to make good on its commitments to halt its nuclear weapons program.

‘Based on consultations with secretary [John] Kerry and my national security team, it’s clear we’ve made real progress,’ Obama said, while acknowledging that gaps remain between America’s expectations and what Iran has delivered to date.

The president took no questions after he finished reading his statement, and said nothing as a reporter shouted a question about whether he would hit Iran with sanctions similar to those he was leveling on Russia.

The U.S. announcement came as European leaders met into the night in Brussels to discuss taking their own measures aimed at helping ease tensions along Russia’s border with Ukraine.

EU diplomats were also looking at penalties that would go beyond the current travel bans and asset freezes against individuals, though it was unclear whether their sanctions would go as far the U.S.

Until now, the U.S. has insisted on hitting Russia with penalties in concert with Europe in order to maximize the impact and present a united Western front.

The European Union has a far stronger economic relationship with Russia, making the 28-nation bloc’s participation key to ensuring sanctions packages have enough teeth to deter Russia.

But those same economic ties have made Europe fearful that tougher penalties could boomerang and hurt their own economies.

The White House’s willingness to punish Russia without European backing comes as the Obama administration faces criticism that its repeated warnings about tougher sanctions are little more than empty threats.

‘Sometimes I’m embarrassed for you, as you constantly talk about sanctions and yet, candidly, we never see them put in place,’ Republican senator Bob Corker said during a Senate hearing on Ukraine with administration officials last week

The U.S. and Europe have levied coordinated sanctions on Russian individuals and companies connected to Moscow’s alleged destabilization in Ukraine.

Obama administration officials argue that those penalties have had an impact on Russia’s economy, citing International Monetary Fund statistics showing a downgrade in Russia’s growth this year.

However, officials have acknowledged that the sanctions have not had an impact on Putin’s decision-making in Ukraine.

State Department spokesman Jen Psaki said Tuesday that if Putin ‘cares deeply about his people, about the economy, his own country’ the sanctions would shift his calculus.

But Russian Deputy Foreign Minister Sergei Ryabkov blasted the U.S. in the wee hours of Thursday morning in Moscow, warning that a Russian retaliation could be ‘quite painful and serious.’

‘The new decision by the U.S. administration to lodge sanctions under false pretenses against a number of Russian businesses and individuals can’t be called anything other than outrageous and totally unacceptable,’ Ryabkov told the Interfax news service.

Obama and European counterparts have vowed to take even broader sanctions targeting Russia’s lucrative energy and defense sectors, as well as access to financial markets, if Moscow failed to quell tensions with Ukraine. But it is unclear what the new package of U.S. sanctions would include.

During a Group of Seven meeting in Brussels in early June, Western leaders warned Russian President Vladimir Putin those penalties could be levied within a month if Russia did not meet specific conditions.

The conditions included recognizing the results of Ukraine’s May 25 election and starting a dialogue with President Petro Poroshenko, ending support for the pro-Russian insurgency in eastern Ukraine and stopping the flow of arms across the Russian border.

The end-of-June deadline the West outlined for Putin came and went with little follow-through from Russia, yet no penalties were levied by the U.S. and Europe.

Heather Conley, director of the Europe program at the Center for Strategic and International Studies, said the West’s failure to follow through on its threat of sector sanctions has raised a ‘credibility question’ for the Obama administration.

‘I think the bluff has now been fully called,’ Conley said.

If Obama moves forward with unilateral sanctions, he will face opposition from the private sector.

U.S. businesses have been pressing the administration to hold off on sanctions that could put them at a disadvantage in the global economy.

‘It’s not clear to us that breaking commercial ties with the Russia partners, consumers gets anyone to where they want to be,’ said Gary Litman, vice president for international strategic initiatives at the U.S. Chamber of Commerce.

UM– USEKE.RW