| WASHINGTON, July 18
WASHINGTON, July 18 Despite levying six rounds
of increasingly tough economic sanctions against Russia for its
actions in Ukraine, President Barack Obama has left two rich
targets untouched: Moscow's natural gas export behemoth and its
main weapons exporter.
Financial warfare against Gazprom or Rosoboronexport could
invite Russian retaliation against U.S. European allies and
negative consequences for Washington - highlighting the dilemmas
Obama faces as he weighs how to respond to the shoot-down of a
Malaysian airliner over eastern Ukraine on Thursday.
"The problem is that there are really limits on what Obama
can do," said Matthew Rojansky, a Russia expert at the Wilson
Center think tank in Washington. "Even if the impulse is to
punish the Russians, you can only go so far in hitting them
because of the wider repercussions" for European energy supplies
and the global economy.
U.S. officials said on Friday they suspect the Malaysia
Airlines tragedy was the work of Moscow-backed rebels in Ukraine
and that they hoped it would unite the 28-member European Union,
whose sanctions on Russia have lagged well behind Washington.
A U.S. official, speaking on condition of anonymity, said
Washington wants the EU to speed up its timetable for drawing up
a new list of Russian targets for its own sanctions. The EU
deadline is now the end of the month.
On Obama's orders, the U.S. Treasury has carefully tailored
sanctions to inflict maximum pain on Russian President Vladimir
Putin's inner circle and entities backing the Ukrainian rebels,
while minimizing the hurt to European economies and American
business. Republican critics have accused him of being too
restrained toward Russia.
At a press conference on Friday, Obama warned that he was
prepared to tighten sanctions on Russia if deemed necessary but
acknowledged the risk of sanctions' harm to the U.S. economic
recovery and the broader global economy.
"It is a relevant consideration that we have to keep in
mind. The world economy is integrated. Russia is a large
economy," Obama said.
The U.S. president did not signal that new American
sanctions on Russia are imminent.
For now, Obama and his aides appear to be waiting for an
investigation to pin responsibility for the downing of flight
MH-17, and hoping the global outcry will prompt Putin to
withdraw support for the rebels without further economic
Still, said a second U.S. official: "We have plenty of room
to escalate and hurt their economy."
The latest U.S. sanctions on Russia were announced on
Wednesday, the day before the Malaysian flight was shot down by
a surface-to-air missile. They targeted two Russian banks,
energy firms and defense-related entities.
Notably absent was Gazprom, a significant energy supplier to
Europe and to Ukraine itself. U.S. officials acknowledge they
have not targeted Gazprom to date because of concerns it could
retaliate by curbing gas supplies to Europe, with significant
Also off the list was Rosoboronexport, which could cause a
different kind of boomerang. In a quirk of geopolitics, the
United States buys Russian helicopters from the state-run firm
to outfit U.S.-backed Afghan security forces. Cutting off that
flow could be "catastrophic" for Afghan forces fighting the
Taliban, a top U.S. general told Congress on Thursday. [ID:
"If the U.S. and the EU go the next step into broad-brush
sanctions, Russia will retaliate," possibly by withdrawing
support for critical nuclear talks with Iran, said Gary
Hufbauer, a former Treasury official.
Additionally, U.S. energy companies and other foreign firms
in Russia "will pay the price in one way or another," said
Hufbauer, now at the Peterson Institute for International
PRESSURE FROM CONGRESS
Hufbauer predicted the next phase of U.S. sanctions, if it
comes, will involve more surgical targeting of Russian oligarchs
and others close to Putin, not sweeping curbs on entire sectors
of Russia's economy.
That would essentially mean adding more individuals and
entities to existing lists of those frozen out of the U.S.
financial system. But it is unlikely to satisfy U.S. lawmakers
demanding stronger moves if Russia or its proxies are found
responsible for the destruction of flight MH-17, which killed
"When you have a bully in the playground, you've got to
stand up to him. You can't sit there and calculate the potential
economic risk," said Senator Dan Coats, an Indiana Republican
and former U.S. ambassador to Germany, which plays a key role in
EU sanctions policy.
"Better to do it now than to pay a much tougher price, a
much harder price, later," Coats said in a telephone interview.
Senator Chris Murphy of Connecticut, from Obama's Democratic
Party, told Reuters lawmakers are considering introducing
legislation calling for additional sanctions on Russia.
Murphy, chairman of the Senate's Europe subcommittee, echoed
many other U.S. legislators in saying it would be especially
useful if European nations would join in any more assertive U.S.
PRESSURE ON EUROPE?
It remains unclear how hard Obama is willing to push
European allies, or how they would respond to such pressure. But
current and former U.S. officials said they hope European anger
over Thursday's tragedy will help unify the 28-member EU bloc,
which does 10 times as much trade with Russia as the United
More than half of the dead passengers, 189 people, were
Dutch. Britons, Germans and Belgians and one American were also
among the dead.
EU leaders agreed on Wednesday - before the downing of the
Malaysian airliner - to sanction Russian companies that help
destabilize Ukraine and to block new loans to Russia through two
multilateral lenders. But they held off until the end of the
month on identifying those being targeted.
John Herbst, U.S. ambassador to Ukraine from 2003-2006 and
now director of the Eurasia Center at the Atlantic Council, said
the Obama administration must push the Europeans to do more and
if necessary move out even further ahead of its EU allies
despite the risk of causing friction.
"By any comprehensive analysis Russia is much more dependent
on the West economically than the West is on Russia," he said.
"There will certainly be some pain involved in Europe and
the United States if we take very serious sanctions against
Russia," Herbst told reporters on a conference call. "But the
question to ask those short-sighted businessmen who worry about
their profits: What's the cost of a conflagration in eastern
Ukraine which spirals out of control?"
(Editing by Tom Brown)