WASHINGTON -- While Russian President Vladimir Putin used troops to seize Crimea and positioned his military along the Ukrainian border, the Obama administration's strongest weapon against him has been financial sanctions. The White House fired twice this week: banning travel and freezing accounts of individuals, some of whom did not have assets in the U.S. A tougher round of sanctions on Thursday sanctioned 20 of Putin's closest aides and blacklisted a bank that holds many of their personal accounts.
Neither action deterred Putin from formally annexing Crimea on Friday. Yet the Treasury Department's David Cohen, who oversees the Terrorism and Financial Intelligence unit which helped craft the sanctions, told CBS News that the decision to sanction Bank Rusiya caused real pain.
"It has been cut off from Visa/Mastercard, so everybody who has a Bank Rusiya Visa or Mastercard, tried to use it today, transactions are denied," he said. "Whatever accounts they have with U.S. financial institutions, and we know they have accounts with U.S. financial institutions, those accounts are frozen."
In public remarks Friday, Putin mocked the action and said that he planned to move his personal assets to Bank Rusiya on Monday. So far the White House has stopped short of hitting directly at Putin. The goal now is to use sanctions to punish and deter him from making further incursions into Ukraine.
"Imposing sanctions on a head of state is an extraordinary measure," Cohen said. "It's not unprecedented and we're not ruling anything out, but we're looking to impose costs here while also providing a path to de-escalate this crisis."
President Obama will discuss ways to de-escalate the standoff when he heads to Europe next week. He'll meet at the Hague with G-7 leaders who represent the world's largest economies. While Putin and Obama will not meet, their chief diplomats will do so. Secretary of State John Kerry and Russian Foreign Minister Sergey Lavrov plan to hold a bilateral meeting on the sidelines of the summit. They are likely to discuss measures such as deploying international monitors to Ukraine to verify Russian claims that Russian speakers and minorities are being persecuted. The need to protect those groups was the pretense used by Russia for intervention in Crimea.
The U.S. is already preparing a third round of even stronger sanctions that would hit the industrial pillars of the Russian economy if Putin does not back down. Neither the U.S. nor the European Union has yet been willing to deal such a blow in part in part because of fear of blowback.
"We recognize that if we take action against major sectors of the Russian economy, the financial sector, the energy sector, that that could have some impact on the global economy," Cohen acknowledged. He said he didn't know whether the Russians will retaliate or how they would do so. Massive U.S. businesses including ExxonMobil, Boeing and others have voiced concern that Russia might take action against them.
"The businesses that are in Russia are for the most part large sophisticated businesses," Cohen said, "And I think they are able to make their own assessment of what they need to do to protect themselves."
The extent of Russian retaliation so far was to put travel bans and asset freezes on a handful of U.S. officials and members of Congress.