Crimea and Punishment: Is Obama Serious About Making Putin Pay?

The U.S. president and Congress are assembling a formidable legal arsenal against Russia in response to the putsch in Crimea. Will they use it?

President Obama’s executive order Monday, naming 11 individuals to be sanctioned in connection with their actions against Ukraine, may do little to end the mockery the president has been getting from the right for his diplomacy with respect to Russia’s seizure of the Crimea and his military maneuvering. But the President and Congress are putting into place a legal arsenal that could, if deployed, really wallop President Putin and his camarilla. It all depends on how serious Obama really is.

This started to come into view on March 6, when President Obama un-pocketed his famous pen and signed an executive order “blocking property of certain persons contributing to the situation in Ukraine.” It is aimed at “persons who have asserted government authority in the Crimean region without authorization of the Government of Ukraine.” The order says those who undermine Ukraine’s peace, stability, and sovereignty and contribute to the misappropriation of its assets constitute “an extraordinary threat” to America.

It’s hard to think of language that broad since the Alien and Sedition Acts, which stunned America when they were passed by the 5th United States Congress and signed into law by President John Adams. That was in 1798 during our almost war with France. It’s not my purpose to attribute the negative connotations of the Alien and Sedition Acts to Mr. Obama’s executive order, or the Sovereignty, Integrity, Democracy, and Economic Stability of Ukraine Act of 2014 that is now moving through the Congress. It is merely to mark their potential power.

Obama’s order applies to those whom the treasury secretary, Jacob Lew, and the state secretary, John Kerry, deem to be in violation of its terms. It declares as blocked all their property and interests in property that “are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of any United States person (including any foreign branch).” Their property “may not be transferred, paid, exported, withdrawn, or otherwise dealt in.” He also blocks the individuals from entering America.

The individuals announced by the White House Monday as being targets of sanctions include such figures as an aide to President Putin, Vladislav Surkov; to the chairman of a committee of the Russian legislature, Leonid Slutsky; to Dmitry Rogozin, deputy premier of the Russian federation; to the fugitive president of Ukraine, Viktor Yanukovych, who urged a Russian invasion. The 11 figures named Monday mark the principle that America will target political figures fronting for Putin’s putsch.

The sanctions put them — and any others like them — in the line of fire of the Office of Foreign Assets Control and of one David Cohen, the Treasury undersecretary for “terrorism and financial intelligence.” Cohen was described by one savvy market adviser, in a cable over the weekend, as “a ninja warrior of global finance: you mess with him at your peril.” He has blocked Iranian money, Mexican drug cash, and, as this adviser put it, “plenty of other things we don’t read about.”

There have already been hints that the Kremlin comprehends at least some of what it’s up against. Feature the report last week from the Fed, which disclosed that $104.5 billion in American government securities were moved from custody of the Federal Reserve Bank of New York. One market letter circulating around town characterized the market’s conclusion as being that “this was the Central Bank of Russia reacting to President Obama’s March 6th executive order.”

It’s not so clear, though, that the Kremlin fully appreciates its predicament. “Dead wrong” is how the market letter is characterizing any supposition by the Russians that they could dodge the Treasury ninjas by moving custody to a different bank. It reminds me of the way things used to work during the American embargo of communist North Vietnam. Washington asserted authority over any deposit in a U.S. bank, any deposit in a foreign bank branch in America, any deposit in a foreign bank branch overseas if the foreign bank had a branch in America, and any deposit in a foreign bank without branches in America if the deposits were denominated in dollars.

Vietnam, of course, weathered those sanctions. But it had a banker in Russia and, to a degree, a backer in communist China. A European continent that was hostile to America’s and freedom’s cause in Vietnam. It’s not so clear who is going to run that kind of interference for President Putin, though the Daily Beast is reporting that an analysis by an investment firm called Macro-Advisory, which operates in Russia, reckons the starting sanctions against Russia would be only an “inconvenience” in the near term.

That analysis, the Daily Beast reports, characterizes as “disruptive” more drastic measures that would include “going after Russia’s ability to interact in global financial markets," which the analysis calls “disruptive,” and restrictions on Russian energy exports or trade sanctions, which the analysis says would be “catastrophic.” So the question really boils down to how aggressively President Obama and the United States Congress are going to wield the legal arsenal they are now assembling. If Putin and his camarilla are studying the example of Iran, they may be betting that Obama will, even when he has his adversary in a corner, flinch.

Seth Lipsky is editor of The New York Sun www.nysun.com. He was a foreign editor and a member of the editorial board of The Wall Street Journal, founding editor of The Forward and editor from 1990 to 2000.

AP