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Obama says strains over Ukraine not leading to new Cold War with Russia

by Steve Holland and Anna Yukhananov, Reuters

July 29, 2014 | 3:40 pm

<em>U.S. President Barack Obama speaks to reporters about new sanctions imposed on Russia on July 29. Photo by Joshua Roberts/Reuters</em>

U.S. President Barack Obama speaks to reporters about new sanctions imposed on Russia on July 29. Photo by Joshua Roberts/Reuters

President Barack Obama escalated U.S. economic sanctions against Russia on Tuesday for its aggression against Ukraine but dismissed suggestions the growing chill in U.S.-Russian relations marked the start of a new Cold War.

The United States and the European Union, in a carefully coordinated action, announced targeted new sanctions against Russian banks, energy and defense firms.

It was the West's most serious response yet to what it calls Russian instigation of and continuing support for the separatist uprising in the east and the shootdown of a Malaysian passenger jet on July 17 over eastern Ukraine.

Obama, speaking at the White House, said the sanctions will have a "greater impact on the Russian economy than we've seen so far" in a drive to force Moscow to stop backing the separatists.

Until now Europe had stopped short of tougher steps against Russia for fear of retaliation. Obama said the new sanctions were a sign of "the waning patience Europe has with nice words from President (Vladimir) Putin that are not matched by actions."

Senior U.S. officials voiced growing alarm about a Russian troop buildup on the border with eastern Ukraine and a continued supply of heavy weaponry to the separatists.

These are signs that, so far at least, the sanctions are not forcing Putin to back down despite the damage the sanctions are doing to the Russian economy.

"It's not a new Cold War," Obama told reporters. "What it is, is a very specific issue related to Russia's unwillingness to recognize that Ukraine can chart its own path."

The new targets for sanctions included VTB, the Bank of Moscow, the Russian Agriculture Bank and the United Shipbuilding Corp., the Treasury Department said.

The sanctions on the three banks prohibit U.S. citizens or companies from dealing with debt carrying maturities longer than 90 days, or with new equity.

Five of the six largest state-owned banks in Russia are now under U.S. sanctions.

Also targeted was United Shipbuilding Corp, a shipbuilding company based on St. Petersburg, in a move that freezes any assets it may hold in the United States and prohibits all U.S. transactions with it.

The Commerce Department classified United Shipbuilding Corp as a defense technology company.

The new sanctions block the exports of specific goods and technologies to the Russian energy sector. The Commerce Department said it will deny any export, re-export or foreign transfer of items for use in Russia's energy sector that may be used for exploration or production of deepwater, Arctic offshore or shale projects that have the potential to produce oil.

Obama also formally suspended credit that encourages exports to Russia and financing for economic development projects in Russia. He warned there would be additional costs to Russia should Moscow not back down.

"Obviously, we can't, in the end, make President Putin see more clearly," Obama said. "Ultimately, that's something President Putin has to do on his own."

The Ukraine crisis has set back U.S. relations with Russia to near-Cold War levels. Ties were further strained this week by U.S. charges that Russia had violated the 1988 Cold War-era Intermediate-Range Nuclear Forces Treaty designed to eliminate ground-launched cruise missiles.

White House officials refused to divulge details of the allegations but demanded immediate talks with Moscow, whose response thus far has been "wholly unsatisfactory," said White House spokesman Josh Earnest.

The new U.S. sanctions were announced during a visit to Washington by Ukraine Foreign Minister Pavlo Klimkin, who discussed prospects for resolving the conflict with Secretary of State John Kerry.

Both Kerry and Klimkin told reporters further pressure on Russia was essential to halt the flow of men, money and weapons into eastern Ukraine, but said the United States and Ukraine were examining possible political steps that could be taken inside Ukraine to address Russian concerns.

"We talked today about a political road ahead," Kerry said. That included looking at ways in which Ukraine can convince Moscow that it will fulfill earlier promises, which included giving Russian speakers in the east more autonomy and rights.

Discussing ways to "de-escalate" the situation on the ground, Klimkin stressed Ukraine's commitment to decentralize power.

Additional reporting by Eric Beech, Will Dunham and David Storey; Editing by Sandra Maler and Tom Brown

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