U.S. Imposes New Sanctions on Putin Allies

ATP - WASHINGTON—The Obama administration slapped fresh sanctions on Ukrainian and Russian businessmen and politicians close to President Vladimir Putin, a move that was designed to show support for Kiev but could undercut U.S. efforts to cooperate with Moscow on ending the Syrian war.

The Treasury Department on Tuesday said the penalties were aimed at forcing Russia to comply with diplomatic agreements designed to stabilize Ukraine and force Russian troops out of Crimea, which the Kremlin formally annexed last year.

The timing of the sanctions highlights the complicated ties between the two powers. While opposing Russia's aggression in Ukraine, the administration has worked to secure Moscow's cooperation in the fight against the Islamic State extremist group and in efforts to end the Syrian conflict.

"This is a continuation of the unfriendly line against Russia that runs counter to logic," Kremlin spokesman Dmitry Peskov told state media. "This is a continuation of the line having a devastating effect for bilateral relations."

U.S. officials said they expected Russia might try to retaliate for the sanctions, possibly by further undercutting American efforts on Ukraine and Syria. But they added that Russia's oil-dominated economy is continuing to deteriorate as global crude prices plunge.

"They have to decide whether an escalatory cycle is what they want," said a senior U.S. official working on the sanctions. "There's a lot of unhappiness there."

Among those blacklisted were top Russian businessmen the U.S. accused of helping the Kremlin evade Western sanctions imposed last year after the Crimea land grab. The individuals named Tuesday in the U.S. sanctions couldn't be reached to comment.

"It is critical that Russia takes the steps necessary to comply with its obligations under the Minsk agreements and to ensure a peaceful settlement of the conflict in Ukraine," said John Smith, acting director of Treasury's Office of Foreign Assets Control.

Administration officials said they have stressed to the Kremlin that U.S. policy toward Ukraine was separate from Syria and that Mr. Putin wouldn't be allowed to trade cooperation on Syria for the U.S.'s and Europe's acceptance of Russia's moves into Ukraine.

"The Russians can't buy a pass on Ukraine by talking to us on Syria, which they haven't been that helpful on anyway," said the senior U.S. official. "We meant what we said. The Russians might not believe us."

The U.S. will continue to work constructively with Russia in areas where the two countries have shared interests, a senior administration official said.

"Syria and Ukraine are totally different, and we've been crystal clear," a White House official said.

President Barack Obama has emphasized the distinction to Mr. Putin during their recent interactions, a senior administration official said. The two leaders most recently huddled last month on the sidelines of the international climate talks. The U.S. and Russia also pressed through a new United Nations Security Council resolution on Friday that seeks to forge a cease-fire in Syria within the next six months.

The Obama administration has courted Russia in recent weeks in a bid to jointly end the war in Syria and to fight the Islamic State terrorist organization.

Secretary of State John Kerry met Mr. Putin in Moscow last week and appeared to soften Washington's line on the conflict, saying the U.S. wasn't seeking "regime change" in Damascus. Russia is among Syrian President Bashar al-Assad's most important backers.

The administration described the latest actions as "maintenance sanctions" aimed at including subsidiaries of entities that have already been sanctioned and at responding to steps that individuals and companies have taken to sidestep the sanctions. The sanctions also coincide with actions taken by the European Union, ensuring that the U.S. and Europe remain in lockstep in responding to Russia, the White House official said.

The most politically significant measures targeted companies controlled by people in Mr. Putin's inner circle, including Gennady Timchenko and the Rotenberg brothers, Boris and Arkady. U.S. officials said Mr. Timchenko and the Rotenbergs have been key players in the Kremlin's financial networks and its attempts to evade Western sanctions.

"If you take sanctions on cronies seriously, you have to go after their front companies and their agents and their associates," the senior official working on sanctions said. "That's what we did."

The three men were first sanctioned shortly after the start of Kremlin aggression in Ukraine last year, and all three claim to have been unfairly targeted. But U.S. officials have long been concerned that the effect of those sanctions was blunted because the men concerned were able to transfer their assets to others, thus avoiding the bite of the U.S. financial penalties. They "engaged in serious and sustained sanctions evasion," the Treasury said Tuesday.

Mr. Timchenko, for instance, sold his stake in oil trader Gunvor just days before he was hit by sanctions in March of 2014. That placed Gunvor—which the Treasury alleged holds some of Mr. Putin's own investments—out of reach of the U.S. regulators.

Both Gunvor and Mr. Timchenko have denied any financial connections to the Russian president. The Rotenberg brothers, who grew wealthy in part by winning state contracts, have also engaged in shielding their assets from sanctions, the U.S. Treasury says.

The Treasury also sanctioned officials in former Ukrainian President Viktor Yanukovych's government, as well as separatist leaders and companies that are doing business in Crimea. Among the former Ukrainian officials blacklisted were Vitaliy Zakharchenko and Dmytro Tabachnyk, whom the U.S. accuses of corruption and ordering the crackdown on political protestors in 2014.

Colleen McCain Nelson in Kailua, Hawaii, contributed to this article.