MOSCOW (AP) — U.S. and European sanctions against Russia’s energy and finance sectors are strong enough to cause deep, long-lasting damage within months unless Moscow persuades the West to repeal them by withdrawing support for Ukrainian insurgents.
The U.S. and European Union released details Wednesday of new sanctions aimed at hurting Russia’s economy without doing undue damage to their own trade interests, punishment for alleged Russian support for Ukrainian rebels and Russia’s annexation of the Ukrainian peninsula of Crimea.
The sanctions go further than earlier penalties — which had largely targeted individuals — by broadly limiting the trade of weapons and of technology that can be used in the oil and military industries. The EU also put its capital markets off-limits to Russian state-owned banks.
Experts said the sanctions wouldn’t have a tremendous impact in the short term, but if left in place for months will stifle development in the Russian economy and sap its financial sector. Already, economists have revised downward their predictions for Russian growth this year, with some saying the country will go into recession.
The biggest immediate impact is likely to come from the financial sanctions. U.S. officials said roughly 30 percent of Russia’s banking sector assets would now be constrained by sanctions.
In a first sign of concern, Russia’s central bank said Wednesday that it would support banks targeted by the penalties.
“State-owned banks are the core of the Russian banking system,” said Vladimir Tikhomirov, chief economist at financial services group BCS. He noted the banks are already having trouble raising money. “That would mean their ability to lend to other banks, smaller banks, is going to be more restricted also.”
Last year, about a third of the bonds issued by Russia’s majority state-owned banks — 7.5 billion euros ($10 billion) — were placed in EU financial markets, according to EU officials.
The measures against Russian banks, which exempt short-term borrowing, are meant to inflict just enough pain without causing them to collapse.
“The aim is not to destroy these banks,” said a senior EU official, briefing reporters on condition of anonymity prior to the sanctions’ official announcement. “We do not want them to get into a liquidity crisis.”
Russia’s foreign ministry complained vocally about the sanctions, criticizing the U.S. for “advancing baseless claims” about its role in Ukraine in a “pretentious, prosecutorial manner.” It criticized the EU for allowing its policy to be “dictated by Washington.”
The key will be how long the sanctions stay in place.
In the short term, Russia has low public debt and enough money to support its banks. The lenders themselves have large reserves.
In the longer term, the sanctions could hurt by fostering a climate of uncertainty — something investors loathe. Some foreign investors are likely to stay away from the sanctioned companies.
Already, as the Ukraine crisis deepened, Russia’s central bank has been forced to raise interest rates several times to stabilize the currency as foreign investors sold it off; investors are expected to pull more than $100 billion out of Russia this year. The central bank last raised rates on Friday in anticipation of the latest sanctions.
Rising rates hurt the economy by making borrowing more expensive; VTB bank chairman Mikhail Zadornov told the Financial Times that the company’s retail arm cut new loans to small business by 20 percent in the first half of 2014.
Even ordinary Russians were worried.
“I have some concerns for my own savings,” said Indira Minigazimova, a resident of southern Siberia who was visiting Moscow.
It is less clear what the impact may be of another key sanction: the EU’s block on exports of technology that can be used for oil exploration and economic development. Russia relies heavily on Western expertise, for example in drilling for oil in Arctic regions.
This area has significantly more risk to Western companies — particularly BP and ExxonMobil — that have big investments in Russia. The sanctions were not expected to affect current deals and shareholdings, though it was unclear what the long-term repercussions for investments might be.
EU officials noted the prohibition would target just one-tenth of overall energy tech exports to Russia.
The reaction in Moscow’s stock markets was mixed Wednesday, as investors had sold off shares in Russian companies for the past two weeks, since the downing of Malaysia Airlines Flight 17 over eastern Ukraine. Reports last week that the new, tougher sanctions were due had also caused markets to tumble ahead of their formal announcement Tuesday.
On Wednesday, the MICEX benchmark index rose 0.9 percent, mainly thanks to a rise in the shares of companies that were spared sanctions. Shares in VTB Bank, Russia’s second-largest and one of the sanctions targets, were down 1.3 percent.
EU officials emphasized that while the latest measures last for one year, they can be annulled at any time — intended as an incentive for Russia to dial back its support for the Ukrainian rebels.
So far, the sanctions have had little effect on Russia’s actions in Ukraine. If anything, Russia appears to have stepped up its engagement in the conflict in recent weeks, with the U.S. and its allies saying Russia has built up troops along its border with Ukraine and sent heavy weapons to the separatists.
Russia, meanwhile, slapped a ban Wednesday on fruit and vegetable imports from Poland, a vocal supporter of tougher EU penalties. Moscow said the ban was for violations of health regulations and documentation procedures for some Polish produce; Poland accused Moscow of retaliation.
An Associated Press-GfK poll conducted just before the latest expansion of sanctions found 53 percent of Americans felt the U.S. had not gone far enough in sanctioning Russia, up from 41 percent who felt that way in March. A majority also supported expanding sanctions to target the Russian economy, including its energy sector, according to the survey of 1,044 Americans. The expanded sanctions drew rare cross-party support among the American public, with majorities of both Democrats and Republicans backing the move.
Indeed, President Barack Obama announced more sanctions Tuesday against three major Russian banks, and said he would block future technology sales to the oil industry.
Fewer of those polled felt the U.S. ought to provide military or financial support to countries if they are targeted by Russia.
Despite the sanctions, Obama said the West is not entering a Soviet-era standoff with Russia.
“It’s not a new Cold War,” he said.
AP-GfK poll: http://www.ap-gfkpoll.com
Baetz reported from Brussels. Julie Pace in Washington, Geir Moulson in Berlin, Danica Kirka in London and Vladimir Isachenkov in Moscow contributed to this report.
McALLEN, Texas (AP) — For nearly two months, images of immigrant children who have crossed the border without a parent, only to wind up in concrete holding cells once in United States, have tugged at heartstrings. Yet most Americans now say U.S. law should be changed so they can be sent home quickly, without a deportation hearing.
A new Associated Press-GfK poll finds two-thirds of Americans now say illegal immigration is a serious problem for the country, up 14 points since May and on par with concern about the issue in May 2010, when Arizona’s passage of a strict anti-immigration measure brought the issue to national prominence.
Nearly two-thirds, 62 percent, say immigration is an important issue for them personally, a figure that’s up 10 points since March. President Barack Obama’s approval rating for his handling of immigration dropped in the poll, with just 31 percent approving of his performance on the issue, down from 38 percent in May.
More than 57,000 unaccompanied immigrant children have illegally entered the country since October. Most of the children hail from Honduras, Guatemala and El Salvador, where gang violence is pervasive. Many are seeking to reunite with a parent already living in the United States.
Since initially calling the surge an “urgent humanitarian situation” in early June, Obama has pressed Central American leaders to stem the flow and has asked Congress for $3.7 billion in new money to hire more immigration judges, build more detention space and process children faster.
House Republicans on Tuesday put forward a bill costing $659 million through the final two months of the fiscal year that would send National Guard troops to the U.S.-Mexico border and allow authorities to deport children more quickly.
By a 2-to-1 margin, Americans oppose the current process for handling unaccompanied minors crossing the border, which requires that those who are not from Mexico or Canada stay in the U.S. and receive a hearing before a judge before they can be deported. Changing the law to allow all children crossing illegally to be sent back without such a hearing drew support from 51 percent of those polled.
Obama’s proposal for emergency funding, in comparison, was favored by 32 percent and opposed by 38 percent.
Santiago Moncada, a 65-year-old Austin resident who is retired from a state human resources job, said he had considered both proposals and ultimately believes the children need to be deported.
“My heart goes out to them,” said Moncada, a political independent originally from the border city of Eagle Pass. “It needs to be done only because we need to send a message saying our borders are closed. You need to apply for citizenship. You need to apply to come to the United States. You can’t just cross the border illegally.
“My problem is, ‘Who’s going to take care of them?’” Moncada said. “There comes a time when we have to say enough is enough.”
Moncada, however, does support creating a pathway to citizenship for many of the 11 million immigrants who already entered the country illegally. He said many are contributing and should be given a way to become citizens.
A majority of Americans still support such a path to citizenship, though that has slipped to 51 percent from 55 percent in May. Strong opposition to that proposal grew to 25 percent in the new poll from 19 percent in May.
Patricia Thompson’s life has intersected in myriad ways with immigration over the years. She was living in South Florida when thousands of Cubans crossed the Florida Straits fleeing communism. Her son helped build part of the border fence near San Diego with the National Guard. And as an assistant professor of nursing and a college student adviser for four decades, she counseled many immigrant students.
In some cases, those students had been brought to the U.S. illegally as children by their parents, said Thompson, 76, who recently relocated to Florence, Alabama, from Little Rock, Arkansas.
“Those kids certainly deserve an immigration chance,” Thompson said, adding that that issue needs to be resolved before the country moves on to another. For the unaccompanied children crossing the border more recently, Thompson said they should be sent back.
“We’ve got to stop this,” said Thompson, who identified herself as a Republican, but said she thought highly of some of Democratic governors in Arkansas. “We can’t take care of the whole world.”
The poll found that most people — 53 percent — believe the U.S. does not have a moral obligation to offer asylum to people fleeing violence or political persecution. And 52 percent say the children entering the U.S. illegally who say they are fleeing gang violence in Central America should not be treated as refugees.
Eric Svien, 57, a political independent who said he leans conservative, works on the investment side of a bank near Minneapolis, Minnesota. Immigration is not his biggest concern. It ranks somewhere behind reform of the tax code, which he said should be the priority. He said the idea of a moral obligation is a “slippery slope.”
“I think we’ve probably been too open in that regard. I think at this point in time when your country’s resources get strained to the point or you just can’t be the caretaker of the world and you’ve got to draw the line somewhere,” he said. “Where that line gets drawn I hesitate to say … That might be one spot where we have to say enough is enough.”
The AP-GfK Poll was conducted July 24-28, 2014 using KnowledgePanel, GfK’s probability-based online panel designed to be representative of the U.S. population. It involved online interviews with 1,044 adults, and has a margin of sampling error of plus or minus 3.4 percentage points for all respondents.
Respondents were first selected randomly using phone or mail survey methods, and were later interviewed online. People selected for KnowledgePanel who didn’t otherwise have access to the Internet were provided with the ability to access the Internet at no cost to them.
AP-GfK Poll: http://www.ap-gfkpoll.com