The Cable

Putin Ignores Western Sanctions, Recognizes Crimean Independence

This post has been updated.

Hours after the United States slapped new sanctions on Russian officials for threatening the territorial integrity of Ukraine, Russian President Vladimir Putin signed a decree recognizing Ukraine's Crimean peninsula as an independent state. The defiant decree, published on the Kremlin's official website, displayed Putin's eager willingness to break with Washington and could likely mark the first step in Russia's absorption of the Black Sea peninsula.

Earlier in the day, President Obama warned Putin not to take such action. "We are imposing sanctions on specific individuals responsible for undermining the sovereignty and territorial integrity and government of Ukraine," President Obama said Monday. "We're making it clear there are consequences for their actions."

The U.S. sanctions will block the assets of seven Russian officials and four Ukrainian leaders, among them ousted President Viktor Yanukovych and separatists in Crimea. Congress is considering legislation that would go even further.

A punishing, if double-edged, weapon to use against Russia would be to target the country's energy powerhouses, especially Gazprom and Rosneft. The two companies dominate Russia's energy production and exports, and are the key levers by which Putin wields energy as a geopolitical weapon. German newspaper Bild reported last week that top Russian energy officials, including the chief executives of both firms, are on the long list of possible European sanctions targets.

Going after the energy firms would obviously deal a blow to an economy that is increasingly in trouble -- both now and in the future. Oil and gas exports make up about half of Russia's federal budget now. And both Gazprom and Rosfneft are at the heart of Russia's efforts to increase production of oil and gas in cooperation with foreign partners including BP and Exxon.

But taking such a step would be particularly painful for Europe, which relies on Russia for about 30% of its natural-gas supplies. With spring looming and gas storage full, Europe is not held hostage by Russian energy the way it was in 2009, when Moscow shut off gas supplies in a dispute with Ukraine. But there is simply no way for Europe to make up for missing Russian supplies in the near term, so the end result would most likely be electricity rationing, higher prices, or blackouts.

Simply put, energy trade between Europe and Russia is a two-way street: Both sides are vulnerable if energy supplies are threatened, whether by EU sanctions or by Russian supply disruptions. In a statement from the Russian Embassy in Washington, an official warned that "Reciprocal steps from the Russian side will definitely follow." 

On Monday, Obama said that he would continue to work with U.S. allies to support Ukraine and would travel to Europe next week.* Vice President Biden will leave tonight to meet with officials in Poland, Estonia, Lithuania, and Latvia.

The move came just hours after European foreign ministers said that they planned to target a broader, but overlapping, list of 21 Russian and Ukrainian officials.  The Russian officials targeted on the U.S. list include influential Putin advisor Vladislav Surkov, Kremlin economic advisor Sergei Glazyev, and chairman of the Federation Council Valentina Matviyenko among others. The EU list didn't sanction those three, but did include others on the U.S. list: Sergey Aksyonov, who claims to be the Crimean prime minister, and Vladimir Konstantinov, the speaker of the Crimean parliament. The EU list included a total of eight Crimean leaders and 13 Russian officials.

Senior administration officials threatened further sanctions if Moscow moves to formally annex the breakaway province -- a move that is expected as early as Tuesday. They also emphasized the historic importance of Monday's actions.

"These are by far the most comprehensive sanctions applied to Russia since the end of the cold war," said a senior administration official, speaking anonymously according to the conditions of a background call for reporters. In a subtle swipe at the Bush administration, the officials noted that similar punitive actions were not taken in the aftermath of Russia's invasion of Georgia in 2008.

The Obama administration also laid out the possibility of future sanctions against anyone aiding Russian officials, including "any individual or entity that operates in the Russian arms industry," in a new executive order targeting Russia specifically.

Though the U.S. sanctions measures have been drafted broadly enough to include any company or individual aiding the Russian government, the administration has also sought to emphasize that it is taking a targeted approach. Officials said Monday that the United States sought to freeze the assets of individuals and not the assets of any state-owned companies that they manage.

Putin will address the Russian public on Tuesday in a planned speech where he is widely expected to call for the formal annexation of Crimea by Moscow. Although Putin is not a target of Monday's sanctions, a senior administration official emphasized that the people targeted are in the Russian strongman's inner circle.

"It is a highly unusual and rather extraordinary case when the United States sanctions a head of state of another country," the official said. "We do not begin these types of sanctions efforts with the head of state."

The officials emphasized the punishing impact the Ukrainian crisis has had on the Russian economy, with its stock market declining 14.7 percent and the Russian ruble depreciating almost 3 percent against the dollar. In January and February alone, investors have withdrawn $33 billion from the country -- a figure that could reach as high as $55 billion by April.

"It's imposing real costs," said the official.

Russian Deputy Prime Minister Dmitry Rogozin who was sanctioned by the U.S. scoffed at the sanctions on Twitter, suggesting that he wouldn't be affected because he didn't have any assets outside the country.

"I think some prankster prepared the draft of this Act of the US President," Rogozin said in a tweet Monday after sanctions were announced.

Anders Aslund, a senior fellow at the Peterson Institute for International Economics, said it was good that the U.S. and Europe are doing something, but it's not enough.

"Is the West prepared to do something serious so it can stop Putin?" Aslund asked in an interview. He said Monday's move was an "insufficient answer" that indicated the West's answer was "either ‘no' or or ‘I don't know.'"

Aslund said a serious response would be sanctioning all the big state companies, freezing Russia's foreign reserves and investigating all the top Russian officials for money laundering.

Given their more measured approach, American and European officials are clearly hoping not to have to go that far.

Keith Johnson contributed to this report.

*Correction, March 18, 2014: Vice President Biden is in Europe for consultations with the leaders of Latvia and other Baltic states about how to respond to Russia's annexation of Crimea. This article yesterday incorrectly said President Obama would be traveling to Latvia. (Return to reading.)



Saul Loeb/ AFP/ Getty Images

The Cable

Russia Vetoes Last-Ditch U.N. Effort to Prevent Crimea Annexation

This article has been updated to reflect new developments at the U.N. Security Council on Saturday, March 15.

Russia on Saturday vetoed a U.S.-drafted Security Council resolution declaring Crimea's upcoming secession referendum invalid, deepening a crisis that threatens to plunge U.S.-Russian relations into their worst state since the Cold War and inflict lasting damage on Moscow's relations with Europe.

Today's vote on a resolution supported by 13 of the council's 15 members left Russia politically isolated at the United Nations. Even Moscow's closest ally, China, abstained -- though it criticized the U.S. push for a resolution as needlessly provocative. It also set the stage for Crimea's pro-Russian leaders to press ahead with a vote on Sunday, March 16, on whether Crimea will leave Ukraine and become absorbed into Russia.

Russia's Foreign Minister Sergei Lavrov said that Moscow intends to respect the outcome of the vote, but he said that President Vladimir Putin will not make a decision on next steps, including on whether to annex Crimea, until after Sunday's referendum.

Moments before the vote, Russia's U.N. envoy Vitaly Churkin defended his government's action, saying that Moscow was upholding the Crimeans' "right to self determination" as enshrined in the U.N. Charter. He said the Crimean people had been forced to take the "extraordinary measure" of pursuing secession as a "result of [an] unconstitutional, violent coup d'etat carried out in Kiev by radical nationalists, as well as direct threats by the latter to impose their order on the whole territory of Ukraine."

Churkin also asserted that Russia can lay a historical claim to Crimea. It is "useful to recall here that until 1954 Crimea was part of the Russian Federation," he told the council. "It was given to Ukraine in violation of the norms of that time under Soviet law and without taking into account the views of Crimea."

But U.S. and European diplomats mocked Churkin's legal reasoning. The "violation of international law [in Crimea] is so obvious that we almost feel pity at witnessing the Russian diplomats being so formalist, so persnickety" in search of a legal case for the deployment of troops in Crimea, said Gerard Araud, France's U.N. ambassador.

Russia's "pathetic effort" to justify its action lacks even the "embryo of legal reasoning," Araud added. "Russia has vetoed the U.N. Charter."

"Russia has used its veto as an accomplice to unlawful military incursion," said Samantha Power, the U.S. ambassador to the United Nations. "But in doing so Russia cannot change the fact that moving forward in blatant defiance of the international rules of the road will have consequences. Nor can it change Crimea's status."   

The United States and European governments are planning on Monday to announce a series of targeted sanctions -- including the freezing of assets and travel bans -- against Russia's political and economic elites. They claim that the referendum is in violation of Ukraine's constitution. Secretary of State John Kerry told reporters in London on Friday that the United States and European governments would not recognize the results of the referendum, and urged other states not to recognize Crimea's change of status.

China's abstention exposed a rare ray of diplomatic daylight between Russia and its closest Security Council ally. But China's U.N. enovy Liu Jieyi made clear his government's break with Russia should not be construed as a show of support for the U.S. initiative in the council, which he said "would only result in confrontation" and "further complicate" efforts to resolve the Ukrainian crisis peacefully.

Liu presented a highly hedged, and opaque, statement that underscored China's long-standing commitment to the principle of non-interference in the affairs of countries while expressing sympathy with Moscow's claims about the threat posed by Ukrainian extremism in Kiev.

The situation in Ukraine, Liu said, has played out against a "complex" historical reality and came about as a result of "accidental and inevitable" forces. In an apparent slap at the United States and Europe, Liu blamed "foreign interference" for triggering a wave of violence that led to the ouster of Ukraine's pro-Russian president Viktor Yanukovych. But he added that all parties needed to carefully consider their next steps, and not take any hasty action that could inflame passions on either side.

Liu outlined three proposals for easing the political standoff, including a call for all parties to refrain from any action that could escalate tensions. He proposed the establishment of an "international coordinating mechanims consisting of all parties concerned to explore the means for a political settlement." He also urged international financial institutions to explore ways to stablize Ukraine's fragile economy. So far, Russia has been unwilling to engage in talks with political leaders in Kiev, whom it views as illegitimate.

With Lavrov saying his government will respect the results of the referendum, backers of the U.N. resolution said they have essentially given up hope that Crimea's pro-Russian leaders can be persuaded to back down from Sunday's vote. They are now channeling their efforts into convincing Russia that the political and economic costs of absorbing Crimea into the Russian Federation are too high.

"We need to show a unified signal from most of the council about the unacceptable nature of the referendum. Obviously, the referendum is going to go ahead and we can't stop that," said one council diplomat. "We are now looking at the Russian reaction to the referendum. Will it press ahead in the Duma [to approve the annexation of Crimea] or will they think twice? If you don't have a resolution they may feel they can get away with the next step."

The U.S.-drafted resolution would have effectively ignored the results of the coming referendum and instead reaffirmed the "sovereignty, independence, unity and territorial integrity of Ukraine within its internationally recognized borders."

The Russian veto, however underscored the limits of U.N. diplomacy in a place where a permanent member of the U.N. Security Council can act at any time to preserve what it considers to be its vital national interests. In the face of Russian opposition, the Security Council has no direct leverage -- either through an appeal to dialogue or the threat of economic sanctions -- to influence the outcome. The most it can do is highlight Moscow's political isolation.

One senior U.N.-based diplomat dismissed the notion that a flurry of meetings, diplomatic initiatives, or the threat of resolutions could embarrass Russian President Vladimir Putin enough that he would change his mind about Crimea.

U.N. diplomacy on Ukraine, the official explained, is beginning to resemble a Kabuki dance, filled with expressive gestures of outrage and indignation but utterly incapable of moving Putin to halt his gradual annexation of Crimea.

The veto of the new resolution caps weeks of often-impotent U.N. diplomacy aimed at heading off a split of Ukraine.

The U.N. Security Council has already convened a total of six emergency sessions on Ukraine, providing a stage for Washington, Kiev, and other foreign capitals to joust with Churkin over the nature of events unfolding in Crimea.

On Thursday, Ukrainian Prime Minister Arseniy Yatsenyuk directly appealed to Russia in the Security Council to reverse course and engage in political talks with Kiev over the future of Ukraine, saying Russia was committing an act of military aggression in Crimea. "We extended our hand to Russia but instead we got a barrel," Yatsenyuk told the council.

But Churkin insisted that "Russia does not want war and neither do the Russians." He said that Russia is trying to balance two competing principles of territorial integrity and the right to self-determination.

Russia has refused to negotiate a resolution to the crisis with Yatsenyuk or other Ukrainian leaders, saying they still recognize Ukraine's ousted president, Viktor Yanukovych, as the country's lawful leader.

Russia has also been cool to U.N. offers to mediate the crisis.

U.N. Secretary-General Ban Ki-moon has sent multiple senior envoys to Ukraine, hoping to initiate talks between Kiev and Crimean separatists. But Crimea's pro-Russian authorities have refused to deal with them. On Thursday, a top U.N. human rights official, Ivan Simonovic, was refused entry into Crimea. Ban's special envoy, Robert Serry, was previously chased out of Crimea by a pro-Russian mob.

The diplomatic logjam at the U.N. has shifted the diplomatic center of gravity to Berlin, one of Russia's main trading partners, and Washington.

The European Union is reportedly planning to meet on Monday to consider a list of up to 130 Russian officials and businessmen who could be targeted by asset freezes or travel bans. On Thursday, German Chancellor Angela Merkel, frustrated that her diplomatic outreach to Putin has failed to restrain Russian behavior, warned that a failure to change direction could  "massively damage Russia economically and politically."

In a six-hour meeting with Lavrov in London on Friday, Secretary of State John Kerry raised concerns about the "large deployments of Russian forces in Crimea and along the eastern border." Kerry said he made it clear that the United States viewed Crimea's referendum as a violation of the Ukrainian constitution and that the international community would refuse to recognize its results. He also informed Lavrov that the Ukrainian prime minister had assured President Barack Obama that he would be prepared to "provide additional autonomy" to Crimea and address Russia's concern about the rights of ethnic Russians in Crimea.

Lavrov told Kerry that Putin would not make any final decision on the status of Crimea until after the vote, but said Russia "does not have any plan to invade east or southern Ukraine." Ukrainian officials, by contrast, point to the tens of thousands of troops massing on their borders as evidence of a coming Russian push to conquer the region.

The United States, meanwhile, is now working to impose its own additional sanctions on Russia. "We believe that a decision to ratify that vote officially within the Duma would in fact be a backdoor annexation of Crimea, and that it would be against the law," Kerry said. "There will be costs."

AFP/ Stan Honda