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Published: Tuesday April 29, 2014 MYT 7:55:35 AM
Updated: Tuesday April 29, 2014 MYT 7:56:49 AM

White House casts Russia sanctions strategy as battle of attrition

WASHINGTON (Reuters) - U.S. President Barack Obama calls his sanctions policy against Russia "calibrated", while his Republican rivals dismiss it a "slap on the wrist" and Russia condemns it as "illegitimate."

As the White House embarks on what experts agree is a cautious approach to penalizing Russia for its intervention in Ukraine, the strategy behind the seemingly light penalties is being cast by Obama administration officials as a slow battle of attrition, chipping away at Russian President Vladimir Putin's credibility while keeping U.S. policy in lockstep with Europe.

The deliberative policy is rooted in Obama's multilateral style of governing and a belief that the United States must not overreach in a way that could have costly consequences. But it has left Obama open to criticism from Republicans in Congress who feel he is too weak and not taking the worst East-West crisis since the Cold War seriously enough.

A third round of sanctions issued on Monday targeted seven Russian government officials, including two from Putin's inner circle, and 17 companies linked to Putin allies. Some 38 people have now been targeted for penalties since Russia's military seizure of Crimea in March. The penalties include asset freezes and visa bans.

The Obama administration's method to imposing sanctions is to slowly increase the pain on Putin's inner circle and those businesses that profit from ties to him, to force the Russian leader to back down from the crisis in Ukraine.

But even Obama admits he is not sure how successful his strategy will be.

"These sanctions represent the next stage in a calibrated effort to change Russia's behaviour," Obama told a news conference in Manila as he wrapped up a week-long Asia trip. "We don't know yet whether it's going to work."

Accusations that Obama was moving too slowly surfaced again on Monday after U.S. sanctions hit Igor Sechin, a Putin ally who heads Russia's major oil company Rosneft, but steered clear of a more substantial target, Alexei Miller, chief of the powerful Russian gas company Gazprom.

"Until Putin feels the real pain of sanctions targeting entities like Gazprom, which the Kremlin uses to coerce Ukraine and other neighbours, as well as some significant financial institutions, I don't think diplomacy will change Russian behaviour and de-escalate the crisis," said Republican Senator Bob Corker of Tennessee.

U.S. officials say Miller and Gazprom could be cited in future sanctions. Given European dependence on Russian natural gas, the United States has been slow to penalize Russia's energy industry.

"I think that our goal is to move in a systematic way, in a careful way, in a way that also gives them (Russia) a chance to change their policy and take a different course," Treasury Secretary Jack Lew, an architect of the sanctions policy, told NBC News. "Our goal here is obviously not to hurt the Russian people. It's to get them to change their policy."

UNDERMINING PUTIN

The broader U.S. goal is to undermine Putin's promise to his people of economic vitality at home.

The Russian stock market has been jolted by the sanctions, the ruble is the worst-performing currency among major emerging markets, and the Russia's economy has experienced $60 billion (35.7 billion pounds) in capital flight this year, exceeding last year's total.

White House deputy national security adviser Tony Blinken told Reuters the hit to the Russian economy is endangering the "compact" Putin has with the Russian people, which has been to promise economic growth and influence for Russians in return for them staying quiet politically.

"He can't deliver on that compact," said Blinken. "So in the near term, there may be some increased nationalism as a result of the actions in Crimea, for example. But over time if he doesn't deliver for people the kind of support he's had is not likely to endure."

Robert Hormats, a former undersecretary of state who is now at the Kissinger Associates consulting firm, said Putin was obviously aware of the U.S. strategy and was "banking on the set of nationalistic forces to keep this going for awhile."

U.S. officials believe it is important to hold in reserve what would be far more consequential, and potentially risky, sanctions against key sections of the Russian economy like energy, defence, financial services, metals and mining and engineering.

These would be launched only under far more dire circumstances, such as a direct Russian military invasion of Ukraine. U.S. officials believe European leaders who Obama has consulted frequently on Ukraine in recent weeks are on board with sectoral sanctions if there is a Russian invasion.

"It's incremental, it's cautious, it's very Obama-esque," said Judith Lee, an international trade lawyer who advises clients on compliance with economic sanctions. "I think the U.S. administration has to walk a very fine line to keep our European allies on board. It's kind of a 'coalition of the willing.'"

While this maintains a united front between the United States and Europe, critics say Obama is missing a chance to show global leadership on the Ukraine crisis. But among the president's Democratic allies on Capitol Hill, there is a recognition that Obama can go only so far for now on sanctions.

"This is what the Europeans can agree to at this time,” one Democratic congressional aide said, speaking on condition of anonymity.

(additional reporting by Patricia Zengerle, editing by Ross Colvin)

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