By  on July 16, 2014

WASHINGTON — The U.S. expanded sanctions against Russia on Wednesday over its escalated insurgency into Ukraine, targeting two key Russian financial firms and two energy firms by limiting their access to U.S. capital markets.

Senior Obama administration officials, speaking on background, said the sanctions were unprecedented and would likely have a significant impact on the Russian economy.

While the actions did not directly impact the global fashion industry, the additional sanctions created uncertainty for U.S. brands selling into the Russian market. In recent months, however, several U.S. and European brands have cited a decline in international travel by free-spending Russian tourists as impacting business, at least in the short term.

The U.S. also imposed sanctions on eight defense technology firms, three separatists, four Russian government officials and designated Feodosiya Enterprises, a key shipping facility in the Crimean peninsula, for being “complicit in the misappropriation of Ukrainian assets.”

The most severe sanctions imposed by the U.S. Treasury Department were against two Russian financial firms, Gazprombank OAO and VEB, and two Russian energy firms, OAO Novatek and Rosneft.

“Given its continued provocations in the Ukraine, today I have approved a new set of sanctions on some of Russia’s largest companies and financial institutions,” President Obama said. “We are freezing the assets of several Russian defense companies and we are blocking new financing of some of Russia’s most important banks and energy companies. These sanctions are significant but they are also targeted and designed to have their maximum impact on Russia while limiting any spillover on American companies or those of our allies.”

“Russia has continued to destabilize Ukraine and provide support for the separatists, despite its statements to the contrary,” said David S. Cohen, undersecretary for terrorism and financial intelligence. “Because Russia has failed to meet the basic standards of international conduct, we are acting today to open Russia’s financial services and energy sectors to sanctions and limit the access of two key Russian banks and two key energy firms to U.S. sources of financing, and to impose blocking sanctions against eight arms firms and a set of senior Russian officials.”

Treasury officials imposed measures against the two banks and two energy firms prohibiting U.S. citizens from making transactions, providing financing or dealing in new debt of longer than 90 days maturity or new equity for Gazprombank OAO and VEB. Gazprombank provides services to more than 45,000 companies and 3 million private individuals, while VEB is a state-owned firm that acts as a development bank and payment agent for the Russian government, Treasury officials said.

The U.S. did not block the property or interests in the property of the banks and energy companies or prohibit transactions with them beyond the specific set of restrictions.

“As a practical matter, this step will close the medium- and long-term U.S. dollar lending window to these banks and will impose additional significant costs on the Russian government for its continued activities in Ukraine,” the Treasury department said.

Asked about the reaction from the American business community, one senior administration official said: “We have heard time and again that the U.S. business community understands the importance of a robust response to the unlawful activity of the Russian Federation in the Crimea and in eastern Ukraine.

“I think the notion that our businesses are not supportive of the U.S. government being forceful in addressing this significant threat is mistaken,” he said. They, like businesses everywhere, want the burden to be shared but in terms of understanding there are burdens to be borne for broader principles beyond just the bottom line, I don’t think our businesses have any difficulty with that notion.”

The European Union was also expected to reveal additional sanctions after a meeting in Brussels on Wednesday night.

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