Tuesday, July 22, 2014

Russia Whines while the U.S. begins to Turns the Screws via Sanctions

Russian policymakers warned Thursday of grave international financial consequences from a new, stronger round of U.S. sanctions, a sign that the measures may be inflicting pain not just on key individuals, but also on a broader swath of Russia’s economy.
Prime Minister Dmitry Medvedev called the sanctions “evil” and warned that Moscow plans to bolster spending on defense and security in response. Russia’s stock market dropped sharply Thursday after the U.S. decision a day earlier to target major Russian banks, energy companies and defense firms with tough restrictions on their finances.
“We may go back to the 1980s in our relations with the states that are declaring these sanctions,” Medvedev said at a meeting of cabinet ministers broadcast on Russian state television. “This is sad,” he said.
“We will also have to give more attention to our defense and security expenditures” in view of the sanctions, he said.
The measures come at a critical juncture in negotiations with Iran over its nuclear program — talks in which Russia’s cooperation has been vital for the United States to achieve its aim of restricting Iran’s ability to build a nuclear weapon.
The Russian Foreign Ministry warned Thursday of unspecified consequences for joint efforts on issues that range far beyond the Ukraine conflict, raising concerns that negotiations with Iran could be affected.Russian Foreign Minister Sergei Lavrov skipped Iran talks this weekend in Vienna, dashing hopes that a deal would be reached by Sunday.
The sanctions are “a primitive attempt to avenge events in Ukraine that are not developing according to Washington’s script,” the Russian Foreign Ministry said in a statement. “A serious loser will be the business community of the U.S.A., which will have to pay the White House’s bill.”
“Such behavior of the Obama administration also inevitably affects the possibilities of our cooperation in many other areas,” the ministry said. “Blackmail will not be tolerated. We reserve the right to retaliate.”
Previous rounds of sanctions had targeted individuals close to the Kremlin in an attempt to influence the escalating separatist conflict in Ukraine, which Russia is accused of fueling with weaponry and support. Until now, the effect of sanctions on ordinary Russians had been relatively diffuse. But the new restrictions on long-term borrowing by two major banks and two of Russia’s largest energy companies could fuel a broader slowdown in Russia’s economy.
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