WASHINGTON — Equity markets appeared unfazed by the sanctions the U.S. and European Union imposed on Russian government officials and Ukrainian separatists on Monday, following a referendum in Crimea to secede from Ukraine, which was supported by Russia but condemned by the international community.
Though the sanctions targeted individuals and did not involve any trade sanctions against Russia, President Obama warned in a news conference that the U.S. and international community will consider further sanctions if Russia continues to provoke Ukraine.
“As I told President Putin yesterday, the referendum in Crimea was a clear violation of Ukrainian constitutions and international law, and it will not be recognized by the international community,” Obama said.
Obama signed an executive order on Monday that froze the U.S. assets of seven Russian government officials who supported Crimea’s vote to secede from Ukraine. He also used an existing order to sanction four Ukrainians, including the country’s former president.
Obama said the initial sanctions were aimed at “entities operating in the arms sector in Russia and individuals who provide material support to senior officials of the Russian government. And if Russia continues to interfere in Ukraine, we stand ready to impose further sanctions.”
Separately, the EU imposed sanctions against Russia on Monday, freezing assets and implementing a travel ban against 13 Russian officials and eight Crimean officials, according to news reports.
After holding their collective breath about the Sunday referendum and the severity of sanctions likely to follow it, investors exhaled Monday, sending the Dow Jones Industrial Average up 181.55 points, or 1.1 percent, to 16,247.22 on word of a 0.8 percent increase in U.S. factory production, the largest increase since August. Overseas markets also moved higher, with Frankfurt’s DAX ahead 1.4 percent to 9,180.89.
While there have not been any clear signals that the U.S. will take action on the trade front, American businesses that export to Russia or have investments in the country are keeping a close eye on the rising political tensions.
Gary Hufbauer, senior fellow at the Peterson Institute for International Economics, said trade sanctions are not likely unless Russian President Vladimir Putin tries to annex Crimea or push further into Ukraine.
“Firstly, my guess is Putin will not foment another takeover in eastern Ukraine. Of course if he does that all bets are off and you will get trade sanctions and much more,” Hufbauer said. “The second point is that I don’t think trade sanctions will be the next step. It will likely be financial sanctions first.”
Stephen Lamar, executive vice president of the American Apparel & Footwear Association, said he has just begun getting calls from concerned members.
“One of the slippery slopes of concern people have is when you see the U.S. respond [with] sanctions, then Russia [could] retaliate or counter sanction, and some of our products might be directly in the crosshairs of retaliation,” Lamar said. “We haven’t seen anything specific to suggest that, but things can quickly spiral out of control.”