Thu, Jul 31, 2014 - Page 1 News List

Russia defiant in the face of historic Western sanctions

‘IN FOR A POUND’:Russia made light of sanctions that are the toughest against it since the Cold War, but analysts said they would be painful to absorb

AFP, MOSCOW

Russian President Vladimir Putin chairs a Cabinet meeting in his Novo-Ogaryovo residence outside Moscow yesterday.

Photo: AFP

A defiant Russia yesterday dismissed unprecedented Western sanctions over Ukraine after Brussels and Washington unveiled the toughest punitive measures against the Kremlin since the Cold War.

The third round of US and EU sanctions aims to force Russia to change tack and halt its support of separatists in Ukraine by targeting its vital financial, arms and energy sectors.

However, Russian Deputy Prime Minister Igor Shuvalov made light of the restrictions, also designed to hit the oligarchs in Russian President Vladimir Putin’s inner circle.

“And what about the sanctions? In for a penny, in for a pound,” he quipped to journalists.

Financial institutions put on a brave face, saying their operations would not be affected, while a top official unleashed a diatribe against the administration of US President Barack Obama.

“Obama will go down in history not as a peacemaker — everyone has already forgotten about his Nobel Peace Prize — but as a US president who started a new Cold War,” Alexei Pushkov, chairman of the foreign affairs committee at the Russian parliament’s lower house, said on Twitter.

There was no immediate official reaction from Putin’s office or the Russian Ministry of Foreign Affairs, but Moscow has long insisted sanctions would merely bring Russia’s society together and make its economy more self-reliant.

The stepped-up sanctions came as Moscow dismissed claims it was responsible for supplying the missile that downed Malaysia Airlines Flight MH17, and fighting in Ukraine showed little sign of abating.

They will notably make it tougher for Russian state-owned banks to access European financial markets, forcing their costs higher and hobbling an already struggling economy.

The Central Bank of Russia said that financial institutions were working normally and that if necessary, it would adopt measures to protect targeted lenders, which include the country’s second-largest bank, VTB.

Economists have warned that Europe’s own economy would also suffer from the so-called “sector sanctions” against its biggest source of energy and its major trading partner.

Despite the dismissive talk in Moscow, a number of economists acknowledged the new restrictions would be painful to absorb for Russia, and could stoke social tensions because its economy is sliding toward a recession.

“The current amount of corporate debt is US$700 billion; these debts should be refinanced,” FBK Strategic Analysis Institute Director Igor Nikolayev said, pointing to a lack of cheap loans in Russia.

Nikolai Petrov of the Moscow-based Higher School of Economics said that this time, the sanctions would be felt by everyday Russians — and predicted they would drive an even greater wedge between Putin and the West.

“The confrontation will increase abruptly. Putin has been practically driven into a corner and this man does not make concessions under pressure,” he said.

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