Ukraine crisis: What can US sanctions against Russian elites achieve?

New sanctions by the US government against individual Russians are designed to prod Vladimir Putin to the bargaining table – and to send a signal that if the Ukraine crisis persists, tougher economic penalties against Russia will follow.

The US move represents a modest and early step on the path of applying economic pressure on Russia's president, aimed at persuading him to respect Ukraine's territorial integrity and reverse his military intervention in its Crimea region. With that, the top-of-mind question is: Do such sanctions against individuals work?

Yes, international finance experts say, but only under the right conditions.

Here's what President Obama said Thursday the United States is doing: Denying travel visas to certain (unnamed) Russian individuals, and using a newly signed executive order to open the door to financial penalties on Russians as well.

Sanctions can provide powerful leverage, international finance experts say, if they gain wide international backing and are not imposed unilaterally by the US.

If the sanctions are tough and Western nations are united, the penalties “could be actually quite effective over time,” Robert Kahn, a senior fellow at the Council on Foreign Relations in Washington, said in a conference call with reporters earlier this week.

So far, however, it’s not clear if the US and European nations – key players in the West’s response to Russia’s Ukraine gambit – are agreed on strong and coordinated action. European nations have taken some actions in recent days, but diverse views exist within the group.

On Thursday, US Secretary of State John Kerry sought to downplay the differences. “I do not believe there is a gap” among European nations, he said at a press conference in Rome. There “may be some differences of opinion about timing or about one particular choice versus another.”

The US and Europe are achieving unity to some degree. The US has suspended trade and investment talks with Russia. The European Union on Thursday did the same, and it is holding up a pre-conflict proposal to grant visa-free travel to Russian citizens.

EU President Herman Van Rompuy said economic sanctions could follow, including travel bans and asset freezes on specific individuals – similar to the steps the White House announced.

Key questions, though, are when would either the US or the EU start to impose financial penalties such as freezing property held by Russian individuals in the West, and which Russians would be singled out in such a move?

“I don't have a timetable for you” about designating Russian individuals for financial penalties, White House spokesman Jay Carney said during a briefing Thursday. He also declined to say whether the US would include Mr. Putin himself in any financial sanctions.

US visa restrictions are already in effect for some Russians and some Ukrainians whom the US believes to have supported the incursion by Russia’s military into the Black Sea peninsula of Crimea, in southern Ukraine.

“The State Department has … put in place restrictions on the travel of certain individuals and officials,” Mr. Obama said.

The Obama administration has framed the pre-sanctions steps it is taking with carefully calibrated rhetoric. Secretary Kerry, in effect, said the US is starting with small moves because it is focused on trying to bring the key parties into negotiations, not to drive anyone away.

“There is a reason why only the legal framework [to freeze bank accounts and other assets] was put in place and not the specific designations” of individuals, Kerry said. “We want to be able to have the dialogue that leads to the de-escalation.”

But another senior administration official, speaking to reporters by phone, said Russian power brokers are now “on notice” that they may lose access to financial assets in the US.

Because the US is so important to the world economy, its move to impose financial restrictions on Russian power brokers delivers at least some sting. But such action is much more powerful when the international community takes such action in concert.

“Creating pain for the Russian elites and creating incentive for a deal,” such as through asset freezes, “will require multilateral support,” said Mr. Kahn.

Russia's business oligarchs have business interests, money, and homes in the West, he said.

If Putin doesn’t back down on his apparent efforts to pry Crimea away from Ukraine, international sanctions against Russians could grow in scale quickly. Potentially, Western sanctions could also involve efforts to cut off Russia’s energy exports (a move that would also impose costs on the West in the form of higher natural gas prices) or to isolate Russia’s banking sector. But some foreign affairs experts doubt whether the US and Europe have the stomach to impose severe economic sanctions.