May 17, 2022

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European sanctions target Putin’s inner circle

European sanctions target Putin's inner circle

BRUSSELS – The list included some high-ranking officials of the Kremlin, the Russian military high command, top bank executives, a prominent news anchor, the head of a global television network, and a Russian businessman with links to a mercenary group.

For years, as part of the circles of power that surround Russian President Vladimir Putin, many have enjoyed lavish lifestyles – villas on Italy’s Lake Como, strolling to see children living in European capitals, shopping on the continent’s coolest streets.

On Wednesday, the European Union targeted them with a raft of sanctions.

EU officials said the nearly 600-page sanctions list – including travel bans and asset freezes – was just a first step, to punish those involved in Monday’s recognition of the so-called Donetsk and Luhansk republics, which the bloc sees as a violation of Ukraine’s territorial integrity. They promised tougher sanctions if Russia escalated the fighting in Ukraine to a full-scale invasion.

They also prevented Russia from raising money in European capital markets through short- and long-term bonds.

In Washington, President Biden also escalated sanctions, a day after blocking two major Russian financial institutions from Western financing and restricting Russia’s access to debt markets. He said the new measure targeted a subsidiary of the Russian energy giant Gazprom, which built the Nord Stream 2 gas pipeline from Russia to Germany. Tuesday, Germany Certificate has stopped from the pipeline.

British Prime Minister Boris Johnson imposed a travel ban on three wealthy Russians – Gennady Timchenko, Boris and Igor Rothenberg – and said any British assets they had in the country would be frozen.

Overall, while the sanctions have affected some of the most important people around Mr. Putin, and the state’s access to debt markets, they have not amounted to stronger measures that may harm not only ordinary Russians but also Europeans, who may be affected by higher energy prices, among other things. And in recent years, Mr. Putin has done Strengthen Russia’s ability to withstand sanctionsreducing its use of the dollar, hoarding currency reserves, and redirecting trade away from Western imports.

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However, experts said, the European measures were impressive because they were delivered uncharacteristically quickly and smoothly, were well coordinated with steps in Washington and were emblematic of the bloc’s willingness to tighten the screws on Mr. Putin and those around him.

The West has made clear that more sanctions may be imposed.

“This is just a starting point,” said John Bedford, partner at law firm Dechert LLP. “I expect that many of these people will not have significant financial interests in the EU, so sanctions will not directly impact. It is not the name of the big few, either because they are holding them for later or because there is no desire to put them on the list at this point.”

The EU’s list reached within the concentric circles around Mr. Putin, and even touched his inner sanctuary, by imposing sanctions on his defense minister, Sergei K. Shoigu, and the president’s chief of staff, Anton Vaino.

Among the people targeted were more than 300 Russian lawmakers who voted to support Mr. Putin’s decision to recognize the so-called republics, and individuals described by Europeans as “advocates” for the move.

Among them are well-known voices defending Russia’s positions and promoting the independence of the enclaves, such as Maria Zakharova, spokeswoman for the Ministry of Foreign Affairs; Margarita Simonyan, who leads the global broadcast network RT, which is funded by the Kremlin; and Vladimir Solovyov, a prominent TV presenter.

The top Russian military leadership and senior executives of the state-owned VTB Bank, which was not on the sanctions list, appeared in the sanctions package.

Yevgeny Prigozhin – a Russian businessman with close ties to Mr. Putin linked to the mercenary group Wagner – was included along with two members of his family.

Some experts noted that some on the EU list, such as Mr. Prigozhin, were already subject to previous sanctions, and questioned whether many people or entities on the list would be severely affected by the additional sanctions. But Western officials hoped the measures would damage the lifestyles of senior Russian officials and make it difficult for Mr. Putin by making those around him unhappy.

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Sanctions mean that individuals will be prevented from traveling to the EU and their assets will be frozen – although an asset freeze can be disingenuous, given the willingness of European banking systems to hide wealth in complex ownership structures.

Restrictions on raising funds in European capital markets may be the most painful part of European sanctions.

“I think the debt and equity ban is by far the strongest part of the EU package,” said Julia Friedlander, director of the Economic Statecraft Initiative at the Atlantic Council.

“This is what the US did as well on Tuesday, but it’s a bolder move by the EU, because Russia has been moving away from holding the US dollar and increasing US dollar-denominated debt since 2014” in favor of the euro, he added.

The EU chose to target specific individuals that could be directly linked to the narrow decision to recognize Luhansk and Donetsk – a move intended to facilitate consensus, given that EU sanctions need unanimous approval. Although sanctions are only an initial step, they are more likely to be an inconvenience, or a lifestyle change, perhaps, than a real financial pain.

Mr. Solovyov, for example, the TV presenter whom the sanctions documents described as an “advocate,” publicly boasted of owning a home near Lake Como. The three-storey mansion is located on an area of ​​900 square meters near the lake and has a large swimming pool and garden, its value in 2016 was more than 5.6 million euros, about 6.3 million dollars.

Such instances of extravagance may attract attention, highlighting the vast difference in lifestyle between ordinary Russians and elites, but the real pain of Putin’s closest allies will be taken away in the larger and more painful sanctions negotiated in the event that Russia invades all of Ukraine.

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Talks about these measures remain difficult, because tougher sanctions on Russia will also hurt European countries that cannot afford the damage as they struggle to recover from the pandemic.

Diplomats involved in the negotiations said that with the exception of Hungary, whose President Viktor Orban admires Putin, and which only reluctantly agreed to the first set of sanctions, other member states are often subject to heavier sanctions. But many have called for exceptions to protect commercial interests.

European Union leaders are due to meet in Brussels on Thursday for an emergency meeting to deal with those differences, and diplomats said no one was willing to appear hesitant in the face of an invasion, so a compromise must be found urgently.

Few European countries are preparing to make an impact in their banking sectors. Diplomats said Italy is calling for tougher sanctions to undo the crackdown on Russian banks, as did Austria, whose Raiffeisen International Bank maintains hundreds of branches in Russia.

And there were more niche concerns, too. Italy would like to see luxury goods excluded from the new sanctions package, in order to preserve the fashion exports favored by the Russian elite. Belgium, home to Antwerp, Europe’s largest diamond center, is pushing for the gem to be excluded.

These types of indulgences, favored among Russian elites and important to the European countries that issue them, were highlighted in a rare scathing tweet on Tuesday by Josep Borrell Fontelles, the bloc’s foreign policy chief who boasts of EU actions.

“No more shopping in Milan,” he wrote, “celebrating at St Tropez Diamonds in Antwerp.”

The tweet was later deleted.

Contribute to reporting Stephen Erlanger from Munich Oleg Matsnev From , Stephen’s Castle from London, Patricia Cohen And the Gaia Pianigiani from Rome.