MOSCOW - American and European sanctions rattled Russia's economy on Friday, with Moscow's stock indexes opening sharply lower, rating agencies threatening to reduce the country's creditworthiness, and hints of trepidation coming from Russia's tycoons as they concluded an annual conference here.
But if the aim of the sanctions is to put economic pressure on the wealthy allies crucial to President Vladimir V. Putin's continued grip on power, there were few signs they would succeed, largely because those targeted were among the new generations of oligarchs who owe their fortunes and loyalties to Mr. Putin.
And even though Russia has become more integrated in the global economy, those who were not targeted - other billionaires and millionaires who have prospered in the Russia that emerged under Mr. Putin's rule - have not shown signs of breaking ranks, either, since the prospects of sanctions first arose.
One of those facing sanctions, Vladimir I. Yakunin, a close adviser and the head of Russian Railways, said in an interview before President Obama's announcement of expanded penalties on Thursday that Mr. Putin was 'a very difficult person' when he felt under pressure to bend to the demands of others and would not yield to international condemnation.
'If anybody thinks he can manipulate him in any way, I suppose that would be the last attempt by anyone who did that,' Mr. Yakunin said. 'He will not forget that - or forgive that.'
Behind the bravado, however, lurked a distinct unease about the possible long-term effects on an already troubled economy.
Like Standard & Poor's, a second rating agency, Fitch, warned that it would downgrade Russia's credit rating. In the first reaction that directly affected ordinary consumers, Visa and MasterCard ceased operations with Bank Rossiya, which was targeted by the new sanctions because, the United States said, it served as a 'personal bank for senior officials of the Russian Federation.'
Russia's finance minister, Anton G. Siluanov, told reporters, 'Imposition of the sanctions is definitely a negative for the general perception of our country's economy,' according to the Interfax news agency. He cited more costly borrowing and the continuing pressure on the stock markets, one of which has fallen 21 percent this year.
Whatever the political consequences, economists say the uncertainty that now hangs over nearly every profitable enterprise in Russia is what poses the gravest threat to the country's long-term prosperity, rather than any immediate consequence of the specific sanctions.
Mr. Putin treated the sanctions as a cause to jest in his first public remarks since Mr. Obama's announcement. At a meeting of his national security council on Friday, he reacted dismissively when discussing those now on the American blacklist, as it has been called here, including three people in the room with him. 'We should distance ourselves from them,' he said, deadpan. 'They compromise us.'
He spoke shortly before the upper house of Parliament, the Federation Council, approved legislation to complete the annexation of Crimea. The 155 members present unanimously approved the measure after a brief, one-sided debate. Mr. Putin then promptly made it official in a signing ceremony at the Kremlin, a mere three weeks after Russian special operations troops began spreading through Crimea on the way to securing it.
In Brussels, Ukraine's acting prime minister, Arseniy P. Yatsenyuk, signed a political association agreement with the European Union on Friday, sealing a pact that Moscow has bitterly opposed. The deal's rejection in November by Viktor F. Yanukovych, Ukraine's president at the time, prompted the uprising that led to his overthrow in February.
Mr. Yatsenyuk signed the central part of a so-called association agreement with European Union officials and with leaders of the body's 28 nations on the fringe of their summit meeting in Brussels. While the pact allows the two sides to deepen their economic and political collaboration, more detailed elements of the deal concerning free trade will be signed only after Ukraine's presidential election, scheduled for May.
Despite the threat of diplomatic isolation and sanctions, the return of Crimea 60 years after the Soviet leader Nikita S. Khrushchev transferred it to the administrative control of Ukraine has been greeted with overwhelming popular and political support that has sent Mr. Putin's ratings soaring to the highest level in five years.
'All these sanctions aren't worth a grain of sand of the Crimean land that returned to Russia,' declared a Twitter post on Friday by Dmitri O. Rogozin, a deputy prime minister who was among those targeted in the first wave of American sanctions announced on Monday.
Square size represents the total energy imports into each country (excluding intra-E.U. trade).
$99 billion
in energy imports
from all countries
Square size represents the total energy imports into each country (excluding intra-E.U. trade).
$99 billion
in energy imports
from all countries
Banks are sure to be careful when considering whether to do business with any company that those on the sanctions list have even some stake in, and there are many such companies. Interest rates on business loans and mortgages, already sky high in Russia by Western standards, with mortgage rates well over 10 percent, are likely to rise still further.
One unsettled question is whether the sanctions will encourage Russians to take their money out of the country and deposit it in Western banks or real estate, given the declining value of the ruble, or have an opposite effect of pushing Russians to hold their savings in rubles or domestic assets, out of a sense of patriotism or fear of sanctions.
Alexander N. Shokhin, the president of the Russian Union of Industrialists and Entrepreneurs, a kind of club for oligarch interests, expressed concern that the consequences could be more severe if Mr. Obama and the European Union made good on threats to intensify the sanctions. At a news conference ending the union's annual conference, he noted that the United States had considerable experience punishing countries and companies for doing business with Iran in response to that country's program to develop its nuclear capacity.
'There might be long-term consequences,' Mr. Shokhin said. 'It might be hard to attract foreign investment now until the investors already working here understand what risks they face,' he added.
For now, the American sanctions do not target the broader Russian economy, but rather the assets of those businessmen closest to Mr. Putin, men he has known for years, whose fortunes rose with his ascent to the peak of political authority.
They include two brothers, Boris and Arkady Rotenberg, whom Mr. Putin befriended as a young man practicing martial arts in Leningrad, as St. Petersburg was called in Soviet times; Yuri V. Kovalchuk, the largest shareholder of Bank Rossiya, whom the Department of Treasury called one of Mr. Putin's 'cashiers'; and Mr. Yakunin, a former Soviet-era commercial and trade attaché at the United Nations who first met Mr. Putin when he was a deputy mayor in St. Petersburg.
'All of the list will chafe at their inability to travel to the U.S.,' the Eurasia Group, a consultancy, wrote in an analysis, 'but the main and largely heartfelt reaction of these elites will be to redouble their loyalty to Putin, to whom they owe their careers and fortunes.'
The group said that another close business ally of Mr. Putin's, Gennady N. Timchenko, could be the most exposed of those facing sanctions because of his holdings outside Russia, including an important commodity trading company, Gunvor Group. The day before Mr. Obama announced the expanded sanctions, Mr. Timchenko sold his share of the company to his Swedish partner, Torbjorn Tornqvist, prompting Mr. Shokhin to suggest that he might have had advance warning.
Mr. Timchenko, through his holding company, Volga Group, owns a 23 percent stake in Novatek, Russia's largest private gas producer, and its shares fell nearly 9 percent on Friday in Moscow.
For some conservatives in Mr. Putin's closest circle of advisers, the political conflict over Ukraine and now the economic sanctions confirmed Russia's worst suspicions of American efforts to dominate the world's economy - at the expense of Russia.
In an interview in his wood-paneled office at Russian Railways, Mr. Yakunin said the United States and its allies in Europe control a 'global financial oligarchy' that is determined to protect its political and economic domination of the world. In his view, the sanctions were not simply a result of Russia's move to absorb Crimea from Ukraine, but an inevitable reflex of a West that views Russia as a threat to its power - a reflex that would fail as Russia forged its own economic course with other emerging economies in Asia and elsewhere.
'Russia was, is and will be some kind of geopolitical competitor to the interests of Anglo-Saxon civilization,' he said.
Posted by Unknown on Saturday, March 22, 2014 - Rating: 4.5
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