E.U.’s Newest Sanctions Targets: Crimean Firms, Not Russian Ones

European leaders expanded their sanctions against those involved in the unrest in Ukraine Monday, but with a surprising twist: the new targets included Crimean firms, not Russian ones.

European Union foreign ministers voted to freeze the assets of two Crimean oil and gas companies, Chernomorneftegaz and Feodosia, that were expropriated after Crimea was annexed by Russia. One of them, Chernomorneftegaz, the Crimean subsidiary of Ukraine’s state-owned oil and gas company, was already blacklisted by the U.S. on April 11.

The EU also went after an array of powerful Russian and Ukrainian figures linked to the ongoing political crisis in eastern Ukraine, where pro-Russian groups held a controversial referendum Sunday that they said showed broad support for self-rule for the area. On Monday, one of the separatist leaders went even further and said eastern Ukraine’s Donetsk region would formally ask to join Russia the way Crimea did earlier this year.

The newly-targeted individuals include Putin’s first deputy chief of staff, Vyacheslav Volodin, as well as several Russian officials who had led the successful push to annex the Crimean peninsula. Ukrainian separatist leaders, including the self-declared mayor of Slovyansk, Viacheslav Ponomariov, were also added to the list. Somewhat surprisingly, Denis Pushilin, a prominent separatist and the self-appointed head of the Donetsk People’s Republic, wasn’t on the list.

"To the extent that the sanctions appear timid they are not having the message in Moscow that they could have," said Steve Pifer, a senior fellow at the Brookings Institution and a former U.S. ambassador to Ukraine. 

The new sanctions further highlight a divide between the U.S. and Europe over how aggressively to use financial blacklists as a tool to cow Moscow. While President Obama has said the U.S. is ready to impose sanctions against whole sectors of the Russian economy, European leaders have been more reluctant because their countries have lucrative and longstanding business relationships with Russian firms. European leaders have steered clear of the powerful businessmen the U.S. has targeted because of their close relationship to Russian President Vladimir Putin and gone after political and military leaders instead.

The foreign ministers, in a joint statement after their meeting in Brussels, condemned Sunday’s vote for separation in Donetsk and Luhansk, and said they wouldn’t recognized the polls or any other "illegitimate and illegal referenda.’"

"The E.U. is alarmed by the continued efforts by pro-Russian separatists to destabilise Eastern and Southern Ukraine," they said in the statement.

The ministers also warned that further sanctions could come if Moscow meddles in Ukraine’s upcoming presidential election on May 25. Obama and German Chancellor Angela Merkel used a White House press conference earlier this month to warn that Russian attempts to derail or delay the election would trigger further sanctions, but it’s unclear what sort of interference, short of an invasion, would bring the truly punishing measures against Russia’s energy or defense sectors that the U.S. has threatened.

Though American and European officials have tried to show a united front against Russia, E.U. leaders have been more hesitant to use the full arsenal of economic tools available. Europe has stronger trade ties with Russia, which could mean that any effort to cut off Moscow could also damage the E.U. member states’ fragile economies. While the Obama administration has tried to squeeze businessmen, like Rosneft chief Igor Sechin, who U.S. officials say are close to Putin, the E.U. has steered clear of sanctioning Russian companies and businessmen.

Anders Aslund, a senior fellow at the Peterson Institute for International Economics, said Europe’s economic concerns may be overblown.

"Lots of money will run out of Russia if there are financial sanctions," he said. "The private sector is running away from Russia."