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Putin's allies hit with sanctions over Ukraine crisis as US, EU push for Russia to back off

U.S. President Barack Obama delivers a speech during a state dinner with Philippine President Benigno Aquino III at Malacanang Palace in Manila, Philippines, Monday, April 28, 2014. This is the last leg of president Obama's four-nation tour. (AP Photo/Francis R. Malasig, Pool)

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U.S. President Barack Obama delivers a speech during a state dinner with Philippine President Benigno Aquino III at Malacanang Palace in Manila, Philippines, Monday, April 28, 2014. This is the last leg of president Obama's four-nation tour. (AP Photo/Francis R. Malasig, Pool)

WASHINGTON - The United States and its European allies hit more than two dozen Russian government officials, executives and companies with new sanctions Monday as punishment for their country's actions in Ukraine, yet the penalties stopped short of targeting Russia's broader economy and it remained unclear if they would work. In Moscow, there was relief that the sanctions were not as far-ranging as feared.

The measures, including asset freezes and visa bans, affect people close to the Kremlin, and Western leaders hope those hurt by the sanctions will pressure Russian President Vladimir Putin to limit his reach in Ukraine and de-escalate the crisis there. However, the Russian leader himself was not among those targeted, and Obama administration officials acknowledged there was no expectation that Putin would quickly change course.

Still, officials in Washington and Brussels said the sanctions, coupled with an initial set imposed following Russia's annexation of the Crimean peninsula last month, would significantly boost the cost to Moscow of ignoring an agreement it signed earlier this month to take concrete steps to ease tensions in Ukraine.

"The goal here is not to go after Mr. Putin personally," President Barack Obama told reporters in the Philippines, where he was wrapping up a four-nation trip to Asia. "The goal is to change his calculus with respect to how the current actions that he's engaging in could have an adverse impact on the Russian economy over the long haul."

Obama said Russia still could resolve the Ukraine crisis diplomatically. But he sounded far from confident about the immediate prospects for the new sanctions packages.

"We don't yet know whether it's going to work," he said.

In addition to the sanctions on the seven individuals and 17 companies, there also are new arms and technology export restrictions on Russia.

Meanwhile, in Brussels, the European Union announced it had added 15 more officials to its Russia sanctions list, bringing to 48 the number of people singled out for "undermining Ukraine's territorial integrity, sovereignty and independence."

They will be banned from travelling to the 28-nation bloc, and their assets will be frozen, the EU said in a statement. The names of the individuals targeted weren't immediately released.

The EU is Russia's biggest trading partner, giving the Europeans greater economic leverage over Moscow than the U.S. has. However, the EU treads more carefully in imposing sanctions since Russia is also one of its biggest oil and gas suppliers — and the bloc apparently shied away from following Washington's lead in targeting specific Russian companies.

Among the U.S. targets is Igor Sechin, president of the Russian state oil company Rosneft, who has worked for Putin since the early 1990s. Sechin was seen as the mastermind behind the 2003 legal assault on the private oil company Yukos and its founder, Mikhail Khodorkovsky, who at the time was Russia's richest man. The most lucrative parts of Yukos were taken over by Rosneft, making it Russia's largest company. Rosneft has a major partnership deal with ExxonMobil.

Also on the list are Alexei Pushkov, the Kremlin-connected head of the international affairs committee of the Russian parliament's lower house, Russian Deputy Prime Minister Dmitry Kozak, and Sergei Chemezov, another longtime Putin ally. The White House said Putin has known Chemezov, CEO of the state-owned holding company Rostec, since the 1980s, when they both lived in the same apartment building in East Germany.

Most of the 17 firms, all privately held, are controlled by three businessmen with close links to Putin: Gennady Timchenko and brothers Boris and Arkady Rotenberg, all of whom were targeted by the first round of U.S. sanctions imposed in March.

One of the companies Timchenko owns is Stroytransgaz, a construction company that has amassed millions in contracts to build oil pipelines for state-owned Transneft. The company has recently expanded and won major deals to build highways and soccer arenas for the 2018 World Cup in Russia.

In Moscow, the new sanctions were seen as milder than many had feared, largely because they did not affect any public companies or major sectors of the economy. The Russian RTS index jumped 1 per cent on the news. Reflecting relief that state banks had not been targeted, Sberbank's stock was up 5 per cent. Shares in gas giant Gazprom rose more than 2 per cent as its chief executive Alexei Miller was spared sanctions.

Rosneft, was down nearly 2 per cent, even though the state oil company itself was not sanctioned. Sanctions could have caused trouble for its partnership with ExxonMobil.

Sechin, the company president, appeared relieved that Rosneft had been spared.

"I consider Washington's latest steps as a high assessment of the effectiveness of our work, and we assure our shareholders and partners, including the Americans, that our effectiveness will not decline and our partnership will not suffer and will develop dynamically," he said, the Interfax news agency reported.

On Capitol Hill, lawmakers from both parties called on the administration to do more.

Bob Corker of Tennessee, ranking Republican on the Senate Foreign Relations Committee, wished for more than "just a slap on the wrist."

"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 this crisis," Corker said.

Sen. Chris Murphy, D-Conn., a member of the same committee, said, "Europe should be leading, not following, on sending a strong message to Russia regarding their illegal actions in Ukraine."

White House officials said they decided last week to impose new sanctions because Russia was not de-escalating the crisis but held off until it could co-ordinate with European allies.

The failed diplomatic agreement reached in Geneva just over a week ago called on the Kremlin to get pro-Russian insurgents to leave the government buildings they have occupied in eastern Ukraine.

Yet the mayor of Kharkiv, the country's second-largest city, was shot and badly wounded on Monday, and hundreds of men attacked a pro-Ukraine rally in the eastern city of Donetsk, wounding dozens. U.N. Secretary-General Ban Ki-moon strongly condemned the capture of European military observers and demanded their immediate release "unconditionally and unharmed."

The U.N. chief said that those who "continue unlawful acts will be held accountable for their actions."

White House aides sought to highlight the impact the sanctions already imposed have had thus far.

Some $60 billion in capital flight so far this year exceeds last year's total; the Russian ruble has depreciated nearly 9 per cent against the U.S. dollar since the beginning of the year; investors are demanding higher risk premiums to hold Russia's debt; the credit agency Standard & Poor's cut Russia's credit rating Friday for the first time in more than five years, and the Russian central bank recently downgraded the country's 2014 growth projection to less than 1 per cent, according to the officials.

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Berry reported from Moscow; Associated Press writers Josh Lederman and Deb Riechmann in Washington, Julie Pace in Manila, Nataliya Vasilyeva in Moscow, Juergen Baetz and Raf Casert in Brussels and Jill Lawless in London contributed to this report.

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