U.S. imposes new sanctions on 7 Russian oligarchs and 17 government officials

Show Caption Hide Caption U.S. hits Russian oligarchs, officials with more sanctions Seven Russian oligarchs and a dozen companies they own and control will be sanctioned by the Trump administration.

The Trump administration imposed new sanctions Friday on 38 individuals and companies close to Russian President Vladimir Putin — including seven Russian oligarchs and 17 government officials — in response to the Kremlin's worldwide pattern of "malign activities," according to senior administration officials.

The seven oligarchs include Oleg Deripaska, an aluminum magnate who had past business dealings with Paul Manafort, Trump's former campaign chairman, who has been indicted by Special Counsel Robert Mueller on money-laundering charges.

Many of the targets are individuals and businesses with ties to Russia’s energy sector, including those linked to state-owned Gazprom. The senior administration officials said the goal was to hit those who have benefited financially from Putin’s position of power.

"Actions have consequences," said the officials, who weren’t authorized to comment by name and briefed reporters on condition of anonymity. "Today's announcement is a result of decisions that the Russian government have made in choosing a path of confrontation."

The sanctions freeze any assets the targeted individuals or firms have in U.S. jurisdictions and prohibits Americans from doing business with them. The officials said, however, the administration would provide guidance to Americans who may currently have business with them about how to wind down that business and avoid violating the sanctions.

Also on the list:

• Vladimir Bogdanov, director general of Surgutneftegaz, a Russia-based oil company.

• Suleiman Kerimov, a member of the Russian Federal Council, who was detained in France in 2017 for allegedly trying to bring in hundreds of millions of euros in suitcases.

• Igor Rotenberg, an oil, gas and drilling magnate.

• Kirill Shamalov, purported husband of Putin's daughter, and an oil and gas baron.

• Andrei Skoch, deputy of the Russian state Duma, or parliament, who, the officials said, has "longstanding ties to Russian organized criminal groups."

• Viktor Vekselberg, an energy sector baron, founder and chairman of the Renova Group, comprised of asset management companies and individual funds. Top executives of the company were arrested in 2016 for allegedly bribing officials connected to a power generation project in Russia.

These Russian billionaires, known as oligarchs, got rich buying state-owned enterprises in 1992 after the collapse of the Soviet Union or later under Putin’s rule. The United States is going after them in a bid to shatter their support for the Russian leader.

The senior officials said the new measures, which have been in the works since the past administration, were not in response to any special event or issue "but the totality of the Russian governments increasingly brazen pattern of malign activity across the world."

The officials singled out acts such as the annexation of Crimea, the supplying of weapons to the Syrian regime of President Bashar Assad and the meddling in the 2016 U.S. elections as well as money laundering.

Treasury designates 7 Russian oligarchs, 12 companies they own or control, 17 senior Russian officials & a weapons trading company and its bank, in response to Russia’s worldwide malign activity: https://t.co/qBeXOOSZ6t — Treasury Department (@USTreasury) April 6, 2018

Among the firms sanctioned is Rosoboroneksport, a state-owned Russian weapons trading company. Officials said the firm has longstanding and ongoing ties to the Syrian government, with billions of dollars’ worth of weapons sales over more than a decade.

Among the government officials on the list are Vladimir Kolokoltsev, minister of Internal Affairs and General Police of the Russian Federation; Alexey Dyumin, governor of Russia's Tula region, who previously headed the Special Operations Forces; and Mikehail Fradkov, president of the Russian Institute for Strategic Studies, a major research and analytical center established by the President of the Russian Federation.

Also included are Timur Valiulin, the head of the General Administration for Combating Extremism within Russia’s Ministry of Interior; Evgeniy Shkolov, a Putin aide; and Konstantin Kosachev; chairperson of the Council of the Federation Committee on Foreign Affairs.

The sanctions also singled out oligarch-owned companies like B-Finance Ltd. — based in the British Virgin Islands and owned or controlled directly or indirectly by Deripaska — Renova Group, and energy companies like GAZ Group and Gazprom Burenie.

The senior Trump administration officials said the individuals and entities on the list have "disproportionally benefited by bad decisions by the Kremlin on their behalf."

What’s Putin’s relationship to the oligarchs?

Putin needs their loyalty and gives them financial benefits in return, said Alina Polyakova, an analyst at the Brookings Institution think tank in Washington.

“Personal sanctions try to put a crack in that web of loyalty,” Polyakova said. They send a message: “You’re rich because of Putin, but you’re going to get hurt because of Putin, too.”

Putin initially waged war against some of these super wealthy men who sought to challenge his authority.

Others became rich under Putin because of their association with him and their support for his regime, Polyakova said.

“These are the people we should be targeting,” she said. Putin, as an authoritarian leader, needs popular support and to “ensure loyalty, first by making sure his loyalists and cronies can profit, and then those profits depend on their loyalty to him.”

Why impose sanctions now?

The sanctions were authorized by a law Congress overwhelmingly passed last summer, which sought to punish Russia for its cyberattacks on the United States during the 2016 presidential campaign. Congress targeted Russia’s oil industry, financial institutions and people and government-owned businesses.

Congress required the administration to identify “the most significant senior foreign political figure and oligarchs” in Russia, plus their net worth.

The classified report, issued in February, assessed the relationship between those people and Putin or other members of the Russian elite, and identified their involvement in corruption.

It also included their sources of income and that for their family members, including spouses, children, parents and siblings, as well as their assets, including non-Russian business affiliations.

What impact could sanctions have?

The sanctions are meant to deter Russia from its aggressive campaign to weaken the West.

Outgoing national security advisor H.R. McMaster described Russia’s motives during his last speech Tuesday at the Atlantic Council in Washington. He said the Baltic states of Estonia, Latvia and Lithuania "have all been targeted by Russia’s so-called hybrid warfare, a pernicious form of aggression that combines political, economic, informational and cyber-assaults against sovereign nations.”

U.S. intelligence agencies and think tanks say Russia also meddled in the 2016 U.S. president election as well as national elections last year in Europe.

Putin is wrong if he thinks he will prevail, McMaster said. “Perhaps he believes that our free nations are weak and will not respond to his provocations. He is wrong.”

The message the U.S. wants to send with these sanctions is that “Putin cannot protect his own people,” said Daniel Fried of the Atlantic Council think tank.

The sanctions demonstrate to Putin’s circle of supporters, “that when Putin attacks the West that doesn’t go cost free,” said Fried, a recently retired chief of sanctions policy at the State Department.

Brett Bruen, who served as director of global engagement in former president Barack Obama's National Security Council, said new sanctions on Putin's inner circle will not have the desired impact.

"We tried this," Bruen said, referring to sanctions on Putin's inner circle for Russia's seizure and annexation of Ukraine's Crimea Peninsula.

Russia has proven it can survive economic sanctions aimed at individuals, which so far are the only tool the West has been willing to use, Bruen said. Instead, the U.S. should launch an aggressive information campaign to damage Putin's popular support — to show the Russian people how Putin's corruption and mismanagement is hurting them and making them unsafe, he said.

"We need to show we have the capacity to hit Putin where it hurts," he said. "Puncture this inflated propagandized public image that he has. Show who and what he is."

What kind of relationship do the oligarchs have with the West?

By supporting Putin, the oligarchs help divide the West and undermine its institutions, often through shell companies and bank accounts in the names of relatives or friends, Polyakova said.

“Yet they want to hide their money and live in the West and vacation in the West and send their kids in Western schools,” she said.

They hoard their money in the West because it’s safer there, in case Putin decides to rein them in, she said.