The potential for broader U.S. sanctions on Russia and Moscow’s threat of responding in kind are raising concerns among U.S. corporations and investors about the economic fallout from the crisis over Russia’s annexation of Crimea.
Rapped by critics for not taking a harsh enough line with Russia, the White House is mulling its next moves.
“We are prepared to impose further costs on Russia for its violation of Ukrainian sovereignty and territorial integrity,” White House spokesman Jay Carney said.
Russia’s deputy foreign minister, meanwhile, promised “a broad range of responsive measures” that “won’t go unnoticed in Washington.”
At stake from the worst East-West crisis since the Cold War is goods trade between the two countries that was worth about $38 billion in 2013.
U.S. companies also have $14 billion in direct investment in Russia, with about half that amount coming the other way, and mutual fund and hedge fund investments in Russian companies, many of them state-owned, is much higher.
Oil major ExxonMobil and aircraft maker Boeing are two companies with strong links to Russia and involved in joint ventures with Russian partners.
Randall Stephenson, chairman of the Business Roundtable and chief executive officer of AT&T, told reporters this week that the Ukraine crisis was “obviously an area of concern” to members.
“Anybody doing business in Europe is watching the situation very, very closely,” Stephenson said.
The Roundtable is an association of chief executives of major U.S. corporations, from the defense industry and consumer manufacturers to the healthcare and technology sectors, many of which have global footprints.
Dozens of the group’s members had a chance to raise their concerns in meetings with top administration officials on Wednesday, at an event featuring Defense Secretary Chuck Hagel and Trade Representative Michael Froman.
But a Pentagon spokesman said the Ukraine crisis was not a major talking point, either in the secretary’s remarks or in the questions and answers afterward.
Hagel cited Western tensions with Russia as an example of the kind of security concerns the United States may have to address unexpectedly in the future, said Rear Admiral John Kirby.
Curtailed Talks on Trade Ties
The Obama administration has curtailed contacts with Russia since the Ukraine crisis blew up, and Froman this month halted his agency’s talks on deeper trade and investment ties with Moscow.
The United States and Russia had started talking about a bilateral investment treaty, and Russian Economy Minister Alexei Ulyukayev said in February the next step would be a meeting of trade experts.
The promise of more sanctions has generated some political posturing as well.
Five U.S. lawmakers, mostly from districts that are home to major U.S. defense contractors, urged Hagel to cut off taxpayer dollars to Rosoboronexport, the Russian state-arms dealer. The U.S. Defense Department has a contract to buy Russian-made Mi-17 helicopters from the company.
Some critics said the U.S. sanctions so far are too weak to deter Russian President Vladimir Putin, while others expressed concern about potential economic impact the sanctions and expected retaliation by Moscow could have on markets and trade.
The U.S. Chamber of Commerce, another Washington-based business group, called for close cooperation with Europe, whose annual trade with Russia is about 15 times larger than that of the United States.
“A go-it-alone approach by the United States could be both economically damaging and ineffective in accomplishing its goals,” said the chamber’s vice president, Myron Brilliant, who oversees international affairs for the group.
Russia joined the World Trade Organization in 2012 and so far has had no trade disputes with the United States, although U.S. trade officials in December raised concerns over vehicle fees, copyrights and a meat additive ban.
Risk of further volatility in Russia has U.S. securities regulators on alert as well.
The Securities and Exchange Commission has contacted public funds with investments in Russia to make sure they are properly managing risks and disclosing those holdings to investors, Reuters reported.
Regulators are focused on whether funds are being open with investors, and whether the funds are preparing about how they might respond to different scenarios or outcomes.
Russia’s currency, the rouble, hit a record low this week, and a rouble-denominated index of Russian stocks is down 12.3 percent for 2014 so far. The dollar-denominated RTS index is down 20 percent. (Reuters)