September 12, 2014 / 2:12 PM / 3 years ago

U.S. intensifies sanctions on Russia over Ukraine

WASHINGTON (Reuters) - The United States hit Russia’s largest bank, a major arms maker and arctic, deepwater and shale exploration by its biggest oil companies with new sanctions on Friday to punish Moscow for its intervention in Ukraine.

The sanctions, coordinated with similar European Union steps, were triggered by what the West sees as Moscow’s recent effort to destabilize eastern Ukraine by backing pro-Russian separatists with troops, heavy arms and cross-border shelling.. They are the latest economic penalties imposed by the West since Russia annexed Crimea from Ukraine in March.

The sanctions target companies including Sberbank, Russia’s largest bank by assets, and Rostec, a conglomerate that makes everything from Kalashnikovs to cars, by limiting their ability to access the U.S. debt markets.

They also bar U.S. companies from selling goods or services to five Russian energy companies to conduct deepwater, Arctic offshore and shale projects. The Russian firms affected are Gazprom, Gazprom Neft, Lukoil, Surgutneftegas and Rosneft.

The United States stressed that the sanctions could be removed if Russia, which denies sending troops into eastern Ukraine and arming the separatists, took a series of steps including the withdrawal of all of its forces from its neighbor.

However, a defiant Russian President Vladimir Putin called the new economic penalties “strange,” given his backing of peace efforts in eastern Ukraine, and Russia’s Foreign Ministry said it would respond quickly with retaliatory measures against what it criticized as another “hostile step.”

SHUTTING DOWN SOME OIL EXPLORATION

The energy sanctions, and similar EU steps, are not designed to curb Russia’s current, conventional oil production but to hit future production by depriving Russian firms of the expertise of companies such as Exxon Mobil Corp and BP Plc.

Russia, along with Saudi Arabia and the United States, is one of the world’s top oil producers and is the main energy supplier to Europe. Like other producers, it is keen to extract oil from the arctic, shale fields and deep sea deposits.

The latest U.S. energy sanctions go further than steps Washington took in July, when the U.S. Commerce Department barred American companies from using certain technologies to exploit oil in shale, deep sea and arctic fields.

A general view shows the headquarters of Sberbank in Moscow September 12, 2014. REUTERS/Sergei Karpukhin

“It is designed to effectively shut down this type of oil exploration and production activity by depriving these Russian companies of the goods, technology and services that they need to do this work,” a senior U.S. official who spoke to reporters on condition of anonymity said of the U.S. and EU steps.

Texas-based Exxon signed a $3.2 billion agreement in 2011 with Russian company Rosneft Oil Co to develop the Arctic, while BP owns 18.5 percent of Rosneft, the Russian state-controlled oil giant, according to Thomson Reuters data.

Earlier this year BP signed a deal to explore for oil with Rosneft in Russia’s Volga-Urals region primarily focusing on unconventional, or shale formations, in that region.

Major oil companies, including Exxon, said they were assessing the sanctions and would comply with U.S. law.

The new U.S. sanctions were timed to coincide with fresh European Union economic penalties that included restrictions on financing for some Russian state-owned companies and asset freezes on leading Russian politicians.

The U.S. Treasury Department said the sanctions include a ban on U.S. individuals or companies dealing with Rostec, a major Russian technology and defense conglomerate, in debt transactions of more than 30 days maturity.

Assets also were blocked for five state-owned defense technology firms, OAO Dolgoprudny Research Production Enterprise, Mytishchinski Mashinostroitelny Zavod OAO, Kalinin Machine Plant JSC, Almaz-Antey GSKB, and JSC NIIP.

The new sanctions also tighten the financial noose on six Russian banks, including Sberbank, by barring U.S. individuals and companies from dealing in any debt they issue of longer than 30 days maturity.

The five banks previously covered had only faced a restriction on debt maturities of more than 90 days. Like those five, Sberbank now also faces a ban on U.S. equity financing.

The Treasury Department also imposed sanctions prohibiting U.S. individuals and companies from dealing in new debt of greater than 90 days maturity issued by Russian energy companies Gazprom Neft and Transneft.

“These steps underscore the continued resolve of the international community against Russia’s aggression,” U.S. Treasury Secretary Jack Lew said in a statement. “Russia’s economic and diplomatic isolation will continue to grow as long as its actions do not live up to its words.”

Additonal reporting by Roberta Rampton, Lesley Wroughton, Timothy Gardner in Washington; Ernest Scheyder in North Dakota, Terry Wade in Houston and Alessandra Prentice in Moscow; Editing by Tim Ahmann and Tom Brown

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