How far do EU-US sanctions on Russia go?

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Pro-Russian separatist fighters in Donetsk, 21 Jul 14Image source, AFP
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Rebels in Donetsk: Russia is being punished by the West for allegedly arming the separatists

New EU and US sanctions have been introduced against Russia for backing separatists in eastern Ukraine.

Since Russia's annexation of Crimea in March the EU and US have ratcheted up sanctions several times, tightening restrictions on major Russian state banks and corporations.

They have blacklisted dozens of senior Russian officials, separatist commanders and Russian firms accused of undermining Ukrainian sovereignty.

What is the scope of new EU sanctions?

Image source, EPA
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Gazprombank - Russia's third largest bank - now has much less access to Western capital

The EU sanctions announced on 12 September targeted Russia's state finances, energy and arms sectors. These are sectors managed by the powerful elite around President Vladimir Putin.

Russian state banks are now excluded from raising long-term loans in the EU, exports of dual-use equipment for military use in Russia are banned, future EU-Russia arms deals are banned and the EU will not export a wide range of oil industry technology.

Three major state oil firms are targeted: Rosneft, Transneft and Gazprom Neft, the oil unit of gas giant Gazprom.

But the gas industry, space technology and nuclear energy are excluded from sanctions.

Dozens of senior Russian officials and separatist leaders are now subject to Western asset freezes and travel bans.

The targets are those considered "materially or financially supporting actions undermining or threatening Ukraine's sovereignty, territorial integrity and independence".

The EU has also followed the US lead in targeting more individuals in President Putin's inner circle, as well as some major companies.

An important target is Bank Rossiya, described as the "personal bank" for senior Russian officials. Its biggest shareholders - Yuri Kovalchuk and Nikolai Shamalov - are blacklisted. They were also co-founders of the mysterious Ozero Dacha Co-operative, a housing community on the shore of Lake Komsomolsk founded in 1996, whose members accumulated massive fortunes under Mr Putin.

Arkady Rotenberg, another long-time acquaintance of Mr Putin, is also under EU and US sanctions. He used to practise judo with Mr Putin and now runs major infrastructure projects. He and his brother Boris own SMP bank and both won lucrative contracts for the 2014 Sochi Olympics.

Image source, Reuters
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Sanctions now target some top aides of Mr Putin in Russia's powerful Security Council

Sergei Chemezov is also on the list. Director of the huge state arms corporation Rostec, in Soviet times he was a KGB officer like Mr Putin and they served together in communist East Germany.

The Kremlin deputy chief of staff Vyacheslav Volodin is also under EU and US sanctions. And some top Russian generals are blacklisted.

The EU - but not the US - has blacklisted the heads of Russia's intelligence services.

How are individuals targeted?

An asset freeze affects not only bank accounts and shares but also economic resources such as property. So those on the list are not allowed to buy or sell their assets in the EU, once the freeze is in force.

The travel ban means being prevented from entering an EU country, even if a person is in transit. They would be placed on a visa blacklist.

There are however some exemptions. Diplomatic immunity still has to be respected, so diplomats can be exempted. A targeted individual may also be exempted on humanitarian grounds, for example if he/she needs to pay for medical treatment. An EU Council document defines the scope of such sanctions.

What has the US done?

Image source, Reuters
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Gennady Timchenko is one of the top players in the Russian business elite

The US sanctions also affect some of Russia's richest businessmen, including President Putin's inner circle.

Among them is Gennady Timchenko, a founder of the commodity trading firm Gunvor. He owns Volga Group, an investment firm with stakes in energy, transport and infrastructure, including Novatek, Russia's second biggest gas producer.

Igor Sechin is another big name on the US list. He is a former intelligence officer and long-term ally of Mr Putin, the most prominent of the inner circle figures who influence Kremlin policy.

Mr Sechin is chairman of oil firm Rosneft, which has energy partnerships with ExxonMobil and the UK's BP.

Mr Putin himself is not on the list - why? Western leaders do not want to treat Russia as an international pariah - they still want to be able to meet Mr Putin face-to-face. If he were on the sanctions list it would become harder to put direct diplomatic pressure on him. The West still needs Russian co-operation on a huge range of issues, including Iran and North Korea.

In July the US expanded its list to include more Russian businesses - including Rosneft and Novatek - as well as Gazprombank, part of the Gazprom state conglomerate. A Russian state bank dating back to the Soviet era - Vnesheconombank - is also on the list.

More US restrictions came in September, targeting the biggest Russian bank - Sberbank - defence conglomerate Rostec, Gazprom and some other major players in the Russian economy. Their access to long-term loans has been blocked.

Like the EU, the US has banned exports of services and technology to Russian state oil firms engaged in Arctic and deep-water exploration.

The famous Kalashnikov arms firm is there too, as are the unrecognised, self-styled "people's republics" established by the separatists in Ukraine's Donetsk and Luhansk regions.

Do any of these measures really hurt the Russian economy?

Image source, Reuters
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Rosneft boss Igor Sechin (right) is a close associate of President Putin

The sanctions send a strong signal to Mr Putin and his powerful allies in business and politics.

The banks and energy companies listed will find it harder to access US and EU capital markets.

And the Western travel bans may hurt Mr Putin's rich and well-connected friends, though the asset freezes may affect them less. London is a popular haunt for Russia's business elite, many of whom have bought expensive properties in Britain.

The EU does much more business with Russia than the US does.

Observers say the sanctions are potentially grim for a Russian economy that has slumped this year. After years when Russia was buoyed by oil income the economy is now facing weaker direct investment and soaring capital flight.

Capital worth $75bn (£44bn) has left Russia so far this year - a much higher rate of haemorrhage than last year.

Russia is teetering on the brink of recession. The economy grew just 1.3% last year and did not grow at all between April and June.

What could the EU lose from worse business ties?

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Russia is now a big market for high-performance German cars

Some EU countries will feel the impact more than others. Russia has become a booming market for Western consumer goods in the past decade.

Germany has appeared especially reluctant to ratchet up sanctions. That is not surprising, as German exports to Russia totalled 38bn euros (£30bn; $51bn) in 2013 - the highest in the EU.

More importantly, Germany gets more than 30% of its oil and gas from Russia. Italy is also highly dependent on Russian energy and some of Russia's former Soviet bloc neighbours rely 100% on its gas deliveries.

The EU's trade with Russia - worth nearly 270bn euros in 2012 - dwarfs US-Russia trade.

Food exporters are already facing losses after Russia announced an immediate embargo on a wide range of food imported from the EU, US, Norway, Canada and Australia. It was announced as a response to the Western sanctions.

Fresh fruit and vegetables, meat, dairy produce and various other foods are affected by the Russian ban, which will last at least a year.

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