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More U.S. Sanctions Pledged Should Ukraine Crisis Persist

The U.S. may impose additional economic sanctions in the next several weeks if violations of Ukraine’s sovereignty continue, a senior Treasury official said.

“What we’re trying to achieve here is to change the calculus of the Russian government,” said David Cohen, undersecretary for terrorism and financial intelligence, according to the transcript of an interview scheduled to air tomorrow on CNN’s “Fareed Zakaria GPS” program.

“We’re trying to create an incentive for the Russian government to recognize that what they need to do is to de-escalate the situation in Ukraine, to take a different path,” he said. “And we’re going to continue to work on creating those conditions in the Russian economy and in the people close to President Putin to try and encourage them to make the right choice there.”

President Barack Obama and German Chancellor Angela Merkel, who met yesterday, said the scheduled May 25 elections in Ukraine are the next trigger point determining whether the U.S. and its allies slap broader sanctions on Russia.

Russian President Vladimir Putin has threatened to escalate economic warfare if further sanctions are imposed.

Sanctions employed by the U.S. and European Union have so far targeted officials, individuals and companies tied to Putin or accused of destabilizing Ukraine. The next step would be action against Russian industries, including banking and energy.

The U.S. has been signaling its ability to take more serious steps to create “an uncertainty in the marketplace,” Cohen said. “And that uncertainty is in fact punishing the Russian economy.”

Capital Flight

U.S. officials say sanctions now in place fueled a record $60 billion capital outflow in the first quarter of this year, as well as losses in Russia’s stock market and currency. The benchmark Micex Index (INDEXCF) has lost more than 13 percent this year.

“I don’t think any leader can just ignore those sorts of very significant economic weaknesses,” Cohen said.

Obama’s list of people forbidden from doing business with the U.S. include OAO Rosneft Chief Executive Officer Igor Sechin and financial institutions such as OAO Bank Rossiya and SMP Bank.

Closing off dollar transactions for the designated individuals and companies is the most powerful tool in the U.S. toolkit, Cohen said.

“The vast majority of global commerce uses the dollar,” he said. “When we impose a sanction on a company, that means that they cannot have access to U.S. financial institutions, to U.S. businesses, or really to trade in the dollar.”

To contact the reporter on this story: Kasia Klimasinska in Washington at kklimasinska@bloomberg.net

To contact the editors responsible for this story: Chris Wellisz at cwellisz@bloomberg.net Brendan Murray, Nancy Moran

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