Mar 20, 2014 | 21:04 GMT

8 mins read

More Russians Targeted in New U.S. Sanctions List

More Russians Targeted in New U.S. Sanctions List  Read more: More Russians Targeted in New U.S. Sanctions List

U.S. President Barack Obama ordered an expansion to the sanctions against Russia on March 20 after Moscow accepted the Duma-approved annexation of Crimea as part of Russia. The expanded list is different in tone than the previous list; it names individuals personally tied to Russian President Vladimir Putin. Thus, on the surface, the new sanctions appear more serious. However, the list still will not have any practical impact on Russia or on the people targeted. The Russians are retaliating with their own symbolic list while the Europeans remain divided on what to do next.

Twenty Russians and one Russian bank have been added to the U.S. sanctions list, which freezes targets' assets within — and travel to — the United States. Unlike the previous list, the expanded sanctions list includes many people who are powerful within Russia. Those on the previous list, such as Deputy Prime Minister Dmitri Rogozin and presidential aide Vladislav Surkov, openly mocked the list, calling it a badge of honor for a Russian. The tone of the new list is more serious, but it does not include any official with major connections to or assets in the United States.

Although the list still is mostly symbolic, Obama said the sanctions are targeting not just those who are responsible for events in Ukraine but also those who support the leadership, namely Putin. The expanded list includes members of Putin's inner circle — the so-called Politburo — who personally organize the behind-the-scenes maneuvers for Putin along with some of the president's personal friends. A seemingly unimportant bank that has quiet ties to Russian natural gas giant Gazprom is also on the list. Obama is sending the message that he understands how Putin operates, even if the sanctions do not impede such operations.

Washington did not place people who would halt negotiations with Ukraine or the West, such as Putin himself or Foreign Minister Sergei Lavrov, on the list. Obama said he wanted to ensure that lines of communication would remain open, leaving the sanctions as a message for now.

Russia's Kremlin Politburo

Russia's Kremlin Politburo

Politburo Members

Russia's Politburo is a loose group of decision-makers under Putin's supervision. Of the Politburo members included on the list, Chief of the Presidential Administration Sergei Ivanov is the most important. Long one of Putin's most trusted associates, Ivanov was nearly the choice to succeed Putin for president in 2008. Ivanov remains among the most influential Kremlin members and has been one of Putin's primary advisers on the situation in Ukraine.

Ivanov has also been one of the important decision-makers and negotiators on defense and security for Russia, regardless of his position in the government, and has been included in talks with the European Union, the United States and NATO on such issues. Moreover, Ivanov has been one of the top negotiators on defense deals with the United States and was an important part of Russia's 2008-2010 campaign inside the United States to solicit talent and cooperation from defense and space firms. Barring Ivanov from the United States does not cripple Russia, but it does send a loud message inside the Kremlin that the United States and Russia have halted such relations for now.

The second Politburo member on the list is Yuri Kovalchuk, who is a board member of the Bank of Russia and reportedly is known as Putin's personal banker. Kovalchuk is a trusted adviser on national business and financial matters. Moreover, he reportedly knows where Putin keeps his own money. His inclusion on the list is a personal strike at the president.

The last Politburo member on the list, Gennady Timchenko, is a bold inclusion, since he is not responsible for actions in Ukraine. However, Timchenko has long been a powerful person in Russia and Europe. He owns oil and natural gas trading firm Gunvor, which is registered in Cyprus but headquartered in Switzerland. Timchenko also owns 24 percent of Novatek, one of Russia's up-and-coming natural gas firms, and is believed to work behind the scenes for Putin on energy deals. Timchenko's inclusion on the list is a message to the Kremlin that Russia's quieter energy deals could be targeted, though this would only be effective if the Europeans also banned him.

Personal Connections

Though not part of the Kremlin's Politburo or inner circle, three people included on the list are personally connected to Putin in important ways.

Russian businessman Vladimir Kozhin heads Putin's Presidential Property Management Directorate, a shadowy organization that is rumored to have collected lists of the assets in Russia and abroad of all major Russian politicians and businessmen. This list is used to pressure those individuals to stay in line with the Kremlin.

Arkady and Boris Rotenberg are co-owners of SGM Group, which provides pipelines to major energy firms. The Rotenberg brothers reportedly fell out of favor with Gazprom when the natural gas giant found cheaper alternatives. However, according to Stratfor sources, the brothers have deep connections with Ukraine's energy oligarch, Dmitri Firtash, who was recently arrested in Austria. Sources say Firtash was targeted in order to trace the Russian money trail from Putin to Ukraine, leading to the Rotenberg brothers as the intermediate link. The brothers are also Putin's former judo sparring partners and are personally close to the leader.

Kremlin Tacticians

Three people on the expanded sanctions list are not in the Politburo but are important to negotiations in other sectors. Head of the Federal Drug Control Service Viktor Ivanov, Chief of Military Intelligence Igor Sergun and Russian Railways President Vladimir Yakunin are all second-tier powerful individuals in Russia. They also have active roles tactically in the Russia-U.S. negotiations on the Northern Distribution Network, the transportation corridor for NATO into Afghanistan. With the United States' need for the corridor diminishing, negotiations with the Russians for its continued use have become less important.

Bank of Russia

The expanded U.S. sanctions list also includes an institution, Bank of Russia. Notably, Bank of Russia is not one of the country's largest banks. It has less than $10 billion in assets, a fraction of those owned by Russia's big three banks: Sberbank ($528 billion), VTB ($267 billion) and VEB ($100 billion). But Bank of Russia is important because it is used by some Gazprom subsidiaries and is used to move around shares of subsidiaries and other firms. Gazprom has its own bank, GazpromBank, for its major financial operations, but Bank of Russia is used for the more low-key and quiet maneuvers.

Banking sanctions are critical in any real sanctions strategy, as seen in the pressure on the Iranian economy brought about by Western banking sanctions. Bank of Russia does not do much business abroad, but U.S. banking sanctions mean that any bank in the world that continues to do business with the Bank of Russia could be cut off from the U.S. financial system. Bank of Russia mostly deals with assets in Russia, but it is unclear how Gazprom uses the bank abroad. Gazprom does have many other banks at its disposal, but Bank of Russia's inclusion on the sanctions list is a message from the United States that Washington is limiting the more discreet mechanisms the natural gas giant uses.

List of Expanded U.S. Sanctions on Russians and Institutions

List of Expanded U.S. Sanctions on Russians and Institutions

What to Expect

The change in the White House's focus in the sanctions prompted by events in Ukraine will alter what the Kremlin does next. Already Russian Deputy Foreign Minister Sergei Ryabkov said Russia is drawing up its own list of sanctions against U.S. officials to mirror the United States' sanctions. Such retaliatory actions are common in U.S.-Russian diplomacy, as seen in the United States' Magnitsky sanction list on Russian officials, which was followed by Russia's Dima Yakovlev Act, which limited U.S. adoptions in Russia.

Thus far, the list of U.S. citizens barred from entering Russia are U.S. Sens. John McCain, Robert Menendez, Daniel Coats, Mary Landrieu, Harry Reid and John Boehner, as well as Obama advisers Caroline Atkinson, Daniel Pfeiffer and Benjamin Rhodes. The list does not include the many U.S. officials who have been traveling through the former Soviet states in recent months, such as U.S. Deputy Secretary of State for Eurasian Affairs Victoria Nuland.

What is important to watch next is how Putin interprets the new U.S. sanctions list. So far, the list only nominally harms Russia — it is an irritant for some Kremlin members' travel (for example, Ivanov) and will change how Gazprom uses Bank of Russia. But the list does not have a larger effect on Russia or the people listed, since they have minimal links with the United States. With the expanded sanctions list, the United States is symbolically attacking the way in which Putin runs his affairs.

Russia has many tools at its disposal to complicate the United States' position in the world, such as providing support for Iran, manipulating Russia's economic and energy relations with U.S. allies in Europe and targeting the operations of U.S. firms working in Russia. All are options for Putin, even if they come with a cost to Moscow in the long run.

The other key development to watch is what Europe does next. The European Union has already drawn up its initial sanctions list, which was even weaker than the United States' initial list. The Europeans showed that they did not want to go after Russia aggressively, and since then there have been a series of splits among the European leaders on what sort of sanctions to impose next. There will most likely be an additional sanctions list from the Europeans after they meet on March 21. It is the Europeans' list that Stratfor will examine next to see if sanctions against Russia will cause Moscow any real pain. 

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