US intensifies sanctions on Russia over Ukraine

US intensifies sanctions on Russia over Ukraine

WASHINGTON - The United States hit Russia's largest bank, a major arms maker and arctic, deepwater and shale exploration by its biggest oil companies with new sanctions on Friday to punish Moscow for its intervention in Ukraine.

The sanctions, coordinated with similar European Union steps, were triggered by what the West sees as Moscow's recent effort to destabilize eastern Ukraine by backing pro-Russian separatists with troops, heavy arms and cross-border shelling.. They are the latest economic penalties imposed by the West since Russia annexed Crimea from Ukraine in March.

The sanctions target companies including Sberbank, Russia's largest bank by assets, and Rostec, a conglomerate that makes everything from Kalashnikovs to cars, by limiting their ability to access the US debt markets.

They also bar US companies from selling goods or services to five Russian energy companies to conduct deepwater, Arctic offshore and shale projects. The Russian firms affected are Gazprom, Gazprom Neft, Lukoil, Surgutneftegas and Rosneft.

The United States stressed that the sanctions could be removed if Russia, which denies sending troops into eastern Ukraine and arming the separatists, took a series of steps including the withdrawal of all of its forces from its neighbour.

However, a defiant Russian President Vladimir Putin called the new economic penalties "strange," given his backing of peace efforts in eastern Ukraine, and Russia's Foreign Ministry said it would respond quickly with retaliatory measures against what it criticised as another "hostile step."

SHUTTING DOWN SOME OIL EXPLORATION

The energy sanctions, and similar EU steps, are not designed to curb Russia's current, conventional oil production but to hit future production by depriving Russian firms of the expertise of companies such as Exxon Mobil Corp and BP Plc.

Russia, along with Saudi Arabia and the United States, is one of the world's top oil producers and is the main energy supplier to Europe. Like other producers, it is keen to extract oil from the arctic, shale fields and deep sea deposits.

The latest US energy sanctions go further than steps Washington took in July, when the US Commerce Department barred American companies from using certain technologies to exploit oil in shale, deep sea and arctic fields.

"It is designed to effectively shut down this type of oil exploration and production activity by depriving these Russian companies of the goods, technology and services that they need to do this work," a senior US official who spoke to reporters on condition of anonymity said of the US and EU steps.

Texas-based Exxon signed a $3.2 billion agreement in 2011 with Russian company Rosneft Oil Co to develop the Arctic, while BP owns 18.5 per cent of Rosneft, the Russian state-controlled oil giant, according to Thomson Reuters data.

Earlier this year BP signed a deal to explore for oil with Rosneft in Russia's Volga-Urals region primarily focusing on unconventional, or shale formations, in that region.

Major oil companies, including Exxon, said they were assessing the sanctions and would comply with US law.

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