Putin Moves to Claim Crimea as West Issues Sanctions

Photographer: Spencer Platt/Getty Images

Armed soldiers without identifying insignia keep guard outside of a Ukrainian military base in the town of Perevevalne near the Crimean city of Simferopol on March 16, 2014 in Perevevalne, Ukraine. Close

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Photographer: Spencer Platt/Getty Images

Armed soldiers without identifying insignia keep guard outside of a Ukrainian military base in the town of Perevevalne near the Crimean city of Simferopol on March 16, 2014 in Perevevalne, Ukraine.

Russian President Vladimir Putin took another step toward annexing Crimea, defying sanctions imposed by the U.S. and European Union in the worst standoff with Russia since the end of the Cold War.

Acting in concert, the U.S. and EU unveiled penalties yesterday on Russian and Ukrainian officials linked to efforts to wrest Crimea from Ukraine. Putin responded by recognizing the breakaway Black Sea region as a sovereign state while Western leaders warned that Russia would face added sanctions, including possibly on energy assets, if it moved deeper into Ukraine.

“Further provocations will achieve nothing, except to further isolate Russia and diminish its place in the world,” U.S. President Barack Obama said yesterday at the White House. The U.S. can “calibrate our response” based on whether Russia chooses “to escalate or to de-escalate the situation.”

Western governments are pressuring Putin to ease tensions after Crimea voted March 16 to join Russia in a referendum held amid an escalated Russian military presence on the peninsula. The confrontation over Crimea has stirred concerns that Russia may move next to annex parts of eastern Ukraine where ethnic Russians make up a large portion of the population.

Putin may explain his plans on Crimea’s accession to Russia today during a speech to lawmakers in Moscow. As the standoff intensified, U.S. Vice President Joe Biden left Washington last night for two days of meetings in Europe with leaders of Poland, Estonia, Latvia and Lithuania -- all Russian neighbors and members of the North Atlantic Treaty Organization.

‘Incremental Strategy’

While the sanctions are the broadest used on Russia since the 1991 fall of the Soviet Union, Western leaders are leaving the door open to diplomacy. They kept more punitive measures in reserve to dissuade Putin from moving further into Ukraine and avoid severing trade ties between Russia and the West, even if that may offer little deterrence, said Michael Singh, managing director at the Washington Institute for Near East Policy.

“Their actual effects are likely to be modest, especially given that Russian officials have had time to shield their assets,” Singh, a former White House National Security Council official under President George W. Bush, said in an interview yesterday. “An incremental strategy is ill-suited to a crisis that is moving quickly -- and moving perhaps toward further conflict.”

EU foreign ministers meeting in Brussels agreed to freeze assets and put visa travel bans on 10 Russian politicians, three military leaders, including Black Sea Fleet Commander Aleksandr Viktorovich Vitko, and eight Crimean politicians.

Yanukovych Named

The bloc didn’t blacklist three members of Putin’s inner circle -- Deputy Prime Minister Dmitry Rogozin and advisers Vladislav Surkov and Sergei Glazyev -- who were hit by the U.S. sanctions. The U.S. also imposed measures on Russian parliament and senate committee leaders Leonid Slutsky, Andrei Klishas, and Yelena Mizulina, and upper house Speaker Valentina Matviyenko, according to a White House statement.

The U.S. penalized four Ukrainians including ousted President Viktor Yanukovych. Crimean separatist leader Sergei Aksenov and parliament speaker Vladimir Konstantinov were named by both the EU and U.S. The Obama administration banned all those targeted from traveling to the U.S. They will have any assets under U.S. jurisdiction frozen and U.S. entities are prohibited from doing business with them.

Russian presidential spokesman Dmitry Peskov declined to comment on the sanctions before Putin’s speech.

Putin Spared

The measures stopped short of targeting Putin because it’s highly unusual for the U.S. to sanction another country’s head of state, said an Obama administration official, who spoke on condition of anonymity due to the sensitivity of the matter.

U.S. Senator John McCain of Arizona said he was “deeply disappointed that the president did not announce stronger sanctions and a plan for military assistance to Ukraine.”

The U.S. should act to curb Putin “without any boots on the ground,” McCain, a Republican member of the Armed Services and Foreign Relations committees, said yesterday in an interview on Bloomberg Television. He said he supported giving military aid, including “defensive weapons to the Ukrainians now” so there “will be a price to pay” for further Russian incursions.

“Those are the kinds of things that Putin would pay attention to,” McCain said. “I’m not sure what he’s going to do right now, but he has everything set up for an invasion of Eastern Ukraine.”

White House press secretary Jay Carney declined to directly respond to McCain’s remarks. He said additional sanctions may be taken and he didn’t rule out any type of aid to the Ukrainian government.

‘Russian Energy’

The magnitude of the sanctions failed to meet investors’ dire predictions of more turmoil. European stocks rebounded yesterday from a five-week low and Russia’s Micex index rallied. Russia’s ruble extended gains, rising 0.8 percent against a basket of currencies to 42.7510 last night in Moscow.

EU leaders will meet March 20-21 to weigh “additional and far-reaching consequences,” the foreign ministers said in a statement after their meeting yesterday.

Informally, ideas floated publicly by EU officials include restricting Russian access to the European financial system; curbing European investment in Russian industries, notably energy; and imposing European antitrust penalties on OAO Gazprom. (GAZP) No deadline has been set for wider economic sanctions.

“We have started today discussing the longer term; the need to reduce European dependence on Russian energy over many years to come,” U.K. Foreign Secretary William Hague said yesterday in an e-mailed statement. “It is these sort of things that will be the biggest costs in the long term to Russia if we make no diplomatic progress over the coming weeks.”

Putin Recognition

After 96.7 percent of voters in Crimea backed joining Russia, according to election commission head Mikhail Malyshev, the region’s lawmakers declared independence yesterday, which was met by Putin’s recognition. His government said the vote on the peninsula, given to Ukraine 60 years ago by Soviet leader Nikita Khrushchev, “fully met international norms.”

Russia will need to ratify absorbing Crimea in its lower house of parliament, the State Duma, according to government daily Rossiiskaya Gazeta. Lawmakers in both chambers of parliament will also have to amend the constitution, it said. Alexander Ageyev, the first deputy head of the Russian State Duma’s committee for constitutional affairs, said the process may be done as soon as March 21.

The U.S. and EU rejected the ballot as “illegal.” Hague yesterday condemned Russia’s “flagrant disregard of Ukraine’s sovereignty and territorial integrity” and said the U.K. still considers Crimea part of Ukraine.

Russian Speakers

Russia, which said its soldiers in Crimea are only reinforcing existing bases, says radicals have taken control in Ukraine after Yanukovych was ousted following protests that started in Kiev when he rejected a deal to improve EU ties in favor of financial aid from Russia.

Putin says Russian-speakers in Ukraine are under threat of violence and Russia has an obligation to protect them. Ukraine’s new government rejects that assertion and says Russia has sent its own nationals to foment unrest in the eastern regions of the country of 45 million.

In the EU, the pace of agreeing on a strategy to confront Russia’s attempt to seize Crimea has reawakened divisions in the 28-nation bloc, with former Soviet satellites urging the firmest possible response and EU heavyweights such as Germany and France determined to keep channels open to the Kremlin.

“Countries that are closer to Russia, they see stronger what’s going on,” Estonian Foreign Minister Urmas Paet said in a Bloomberg Television interview. “Countries far away need more time. It is important that there is complete consensus.”

To contact the reporters on this story: James G. Neuger in Brussels at jneuger@bloomberg.net; Stepan Kravchenko in Simferopol at skravchenko@bloomberg.net; Indira A.R. Lakshmanan in Vienna at ilakshmanan@bloomberg.net;

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net John Walcott at jwalcott9@bloomberg.net Michael Shepard, Larry Liebert

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