By Dow Jones Business News,
August 31, 2014, 04:55:00 PM EDT
By William Mauldin and Laurence Norman
U.S. officials are working closely with the European Union to keep their Russia sanctions programs aligned in
timing and severity.
On Saturday, European Union leaders agreed to draw up options within a week for possible new sanctions against
Russia, with action to follow quickly unless Moscow takes clear steps to scale back its intervention in Ukraine. Reports
have emerged that hundreds of Russian soldiers have entered Ukraine.
European Council President Herman Van Rompuy said the bloc wouldn't set out specific criteria for triggering fresh
sanctions but said there was "determination" to ensure Russia paid an appropriate price for heightening tensions.
"I can assure you that everyone is fully aware that we have to act quickly given the escalation on the ground," he
said at the end of a summit of European leaders.
A State Department official said the U.S. is discussing the next steps with European and other allies but declined
to preview possible sanctions publicly. Late Saturday, a spokeswoman for the White House National Security Council said
it is discussing sanctions and other means to "hold Russia accountable for its illegal actions in Ukraine."
The U.S. sanctions are designed to put pressure on people close to the Kremlin's decision makers, and President
Barack Obama on Thursday said U.S. intelligence shows the sanctions are having an effect. Other officials have pointed
to weakness in the ruble and Russian financial markets, which are in part a reflection of the risk of severe sanctions
down the road.
Washington is proceeding carefully with the sanctions in part because of the size of Russia's economy and its large
trading footprint in Europe. The Obama administration sees plenty of scope to broaden sanctions against Russia--
currently Iran and Syria have a far bigger sanctions burden, for example--although if the Ukrainian army suffers further
setbacks, future measures may come too late to affect Moscow's battlefield strategy.
Officials involved in the sanctions work are expected to meet with the U.S. Chamber of Commerce next week,
according to a person familiar with the plans. Business leaders are concerned more serious sanctions targeting broad
sectors of the Russian economy would have a long-term effect on the global companies that count on Russia for a
significant part of their future growth.
Russian nationalist politicians are already seizing on U.S. and European sanctions as an excuse to put pressure on
Western companies doing business in the country, and business groups fear broad swaths of Russian consumers will become
disaffected with Western brands.
McDonald's Corp., whose first Moscow restaurant is a symbol of the collapse of the Soviet Union, has faced
particular pressure since the conflict began, with Russia's consumer regulator shutting down a dozen locations over
alleged sanitary violations and inspecting 100 as of Friday, according to the company.
The closures mark a reversal in Kremlin relations for McDonald's, which in February helped sponsor the 2014 Winter
Olympic Games in Sochi, an international showcase of President Vladimir Putin's Russia. The company says providing safe,
quality products is its main priority.
The most recent measures block U.S.-connected companies and individuals from providing certain types of financing
for several major companies or transferring technology used in Russia's energy industry. The U.S. has also ordered asset
freezes and travel bans for Russian officials and total bans on doing business with some, less prominent firms.
On Sunday, several lawmakers questioned the effectiveness of the sanctions program or called for much tougher
measures. The chairman of the Senate Foreign Relations Committee backed broader "sector" sanctions aimed at particular
industries. "We have to seriously consider sectoral sanctions," Sen. Robert Menendez (D., N.J.) said in an interview
with CNN while visiting Kiev.
Sen. John McCain (R., Ariz.) said stronger sanctions are needed, and he backed providing arms to the Ukrainian
"If you're looking at it from Vladimir Putin's viewpoint, he's done pretty well with minimum of penalty; and as
long as the Europeans are dependent on his energy supply, they're not going to do much," Mr. McCain said on CBS's Face
The chairman of the Senate Intelligence Committee, Sen. Dianne Feinstein (D., Calif.), questioned the effectiveness
of sanctions in Russia, which has endured deep financial crises, as well as the chaos that followed the breakup of the
Soviet Union. "Russians are very brave and very long suffering, and they will tough out any economic difficulty," said
Write to William Mauldin at firstname.lastname@example.org and Laurence Norman at email@example.com
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