US escalates economic sanctions against Russia

WASHINGTON – The United States imposed new sanctions Wednesday on lucrative Russian energy and defense entities, as well as major banks, as the Obama administration struggles for a way to quell an insurgency in eastern Ukraine widely believed to be backed by Moscow.

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The penalties significantly expand on previous U.S. sanctions, which hit Russian individuals and companies with travel bans and asset freezes. But the new sanctions stop short of fully cutting off key Russian economic sectors, a step U.S. officials said they were continuing to hold in reserve in case Moscow launches a full-scale invasion of Ukraine or takes similarly provocative actions.

Obama was expected to speak about the sanctions from the White House Wednesday afternoon.

The Treasury Department sanctions target two major Russian energy firms, Novatek and Rosneft, and a pair of leading Russian financial institutions, Gazprombank and VEB. The sanctions restrict the entities' ability to access U.S. capital markets, officials said.

Eight Russian arms firms responsible for the production of small arms, mortar shells and tanks were also hit with sanctions.

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.

Some European leaders have been wary of deepening penalties on Moscow out of fear that their own economies could suffer, given the deep trade ties with Russia. In recent days, Obama administration officials have been pressuring their European counterparts to press forward and warning that they could take unilateral action if the EU continued to hesitate.

Officials met with EU diplomats in Washington Monday and Obama has made a series of calls to leaders from Britain, France and Germany.

Steven Pifer, the former U.S. ambassador to Ukraine, said the American sanctions will add uncertainty to the Russia economy.

"These are serious sanctions. They target major Russian energy companies and financial institutions," said Pifer, who currently works as an analyst at the Brookings Institution think tank in Washington.

The U.S. has preferred to levy penalties in conjunction with Europe, both to present a united Western front against Russia and to avoid putting U.S. companies at a disadvantage by limiting their access to Russian markets while European counterparts continue to operate without restrictions.

For months, the West has been seeking to punish Russia for annexing the Crimean Peninsula from Ukraine and allegedly backing pro-Russian rebels that have occupied buildings in eastern Ukraine. While those rebels have lost ground in recent weeks, many have begun to group.

The Pentagon also said Wednesday that Russian combat troops are again building up along the border with Ukraine. U.S. officials said they also believe Moscow may be sending heavy weapons into the country to aid the separatists.

Ukraine and the West have accused Russia of fomenting the insurgency by sending troops and weapons, including tanks and rocket launchers, something Moscow denies.

Also included on Wednesday's sanctions list were four individuals: Putin adviser Igor Shchegolev, Russian State Duma Deputy Speaker Sergei Neverov, Ukrainian separatist leader Aleksandr Borodai and Sergey Beseda, an official with Russia's Federal Security Service, the intelligence agency that replaced the KGB after the collapse of the Soviet Union.