Economic Sanctions Are “Wounding Russia’s Economy”
Policy + Politics

Economic Sanctions Are “Wounding Russia’s Economy”

REUTERS/Baz Ratner

President Vladimir Putin may be making territorial gains in Ukraine, but they’re coming at the cost of economic losses to Mother Russia

White House officials today said sanctions imposed last month are already wounding the Russian financial system, and that further military action from Putin will hurt his standing not just abroad but at home as well. 

“Crimea is already becoming a dead weight on Russia,” Tony Blinken, deputy national security adviser to President Barack Obama, said on CNN’s “State of the Union” program. “They are spending billions and billions of dollars to prop up Crimea.” 

Related: Why Putin’s Adventure in Ukraine Is Doomed

He added that Putin “had a compact with his people and the compact is this: I’ll deliver economic growth for you if you remain politically compliant. Right now, he’s not delivering growth.”

The country’s financial markets were rattled last week when the Finance Ministry withdrew a proposed bond offering after investors rejected the government-designated prices. Shortly after that the ratings agency Standard & Poor’s downgraded Russia’s sovereign debt to a level just above “junk bond” status. 

The White House is expected to announce additional sanctions this week. 

“We're going to be in a stronger position to deter Mr. Putin when he sees that the world is unified and the United States and Europe is unified rather than this is just a U.S.-Russian conflict,” Obama told reporters on Sunday during a trip to Malaysia, according to Reuters

Related: Ukrainian PM: We Can’t Stop Russia Alone 

So far, U.S. sanctions have targeted individual Russians and specific banks, as opposed to whole industries. Nor have the sanctions focused on Putin’s personal finances. 

“It’s a rare thing to actually go after a leader of a country,” Blinken said today on NBC’s “Meet the Press” program. When asked if the new sanctions will target Putin’s personal fortune, Blinken said, “I’m not ruling anything in, not ruling anything out.”

Military tensions escalated this weekend as Russian warplanes violated Ukrainian airspace and observers from the Organization for Security and Cooperation in Europe were imprisoned by pro-Moscow separatists who now control the eastern city of Slovyansk. The Russian government has denied any involvement in the eastern Ukraine uprising.

Related: Bond Markets Put the Squeeze on Putin

Meanwhile, the Pentagon is in the midst of deploying 600 troops to nearby Poland for training exercises. NATO has also sent reinforcements to Eastern Europe amid concern that Russia may go beyond Crimea and invade Eastern Ukraine.

“What we’re trying to do is de-escalate this crisis, not escalate it,” Blinken told NBC News. “We don’t see a military confrontation coming of this.”

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