The U.S. and Europe Union imposed the most aggressive sanctions to date on Russian business and said more may follow, acting after weeks of threats to squeeze Russia’s $2 trillion economy over the confrontation in Ukraine.

The Obama administration’s targets include OAO Rosneft, Russia’s largest oil company, natural gas producer OAO Novatek, OAO Gazprombank, the country’s third-largest lender, and eight defense firms, among them the maker of the Kalashnikov assault rifle. EU leaders meeting in Brussels agreed to blacklist companies and halt lending to public-sector projects in Russia.

“These sanctions are significant,” U.S. President Barack Obama said at the White House. “But they are also targeted, designed to have maximum impact on Russia while limiting any spillover effects on American companies or those who are allies.”

Russian President Vladimir Putin denounced the action as a reflection of an “aggressive” U.S. foreign policy. At a news conference in Brazil, he warned they are liable to “boomerang” and hurt U.S. business interests.

The U.S. and EU acted after travel bans and asset freezes aimed at Putin’s inner circle failed to force Russia to meet an ultimatum to end support for separatists in Ukraine’s east. Putin has denied fomenting the rebellion and Russian troops have begun massing anew on Ukraine’s border in recent days.

Differing impact

While Obama sought to assure U.S. companies that the impact on them would be limited, penalties announced by the Treasury Department are more aggressive than Europe’s. That raises questions about whether the effects may be felt more by U.S. financial institutions and businesses than those in Europe.

“Europe chose not to match these sanctions, so it is critical that large European banks not fill the gap left by the withdrawal of U.S. banks,” said Rob Kahn, a former Treasury and International Monetary Fund economist who is now at the Council on Foreign Relations.

Juan Zarate, who served in the Treasury Department and White House under President George W. Bush, said that Putin’s continued support for Russian separatists in Ukraine left the U.S. little choice.

“We’ve got to match our words with meaningful action and these steps represent meaningful action,” he said.

Debt markets

The U.S. sanctions will prevent the Russian companies from accessing U.S. equity or debt markets for new financing with a maturity beyond 90 days. That will raise borrowing costs and effectively cut off medium- and long-term U.S. financing. The measures don’t otherwise prohibit U.S. companies or individuals from doing business with the Russian firms.

The EU said it would halt lending for new public-sector projects in Russia by the European Investment Bank, the bloc’s in-house lender, and will use its influence to stop new lending by the European Bank for Reconstruction and Development.

EU leaders also agreed to consider sanctions on “individuals or entities who actively provide material or financial support to the Russian decision-makers responsible for the annexation of Crimea or the destabilization of eastern Ukraine.” The EU didn’t identify any individuals or companies at the summit and set a deadline of the end of this month for coming up with a list.

German Chancellor Angela Merkel, who has been pushing other European leaders for tough action, said Putin’s government hasn’t met the conditions set out by the EU last month.

“We are all disappointed that we have to take such substantive measures on Russia,” Merkel, who conferred with Obama on July 15, said. “Much too little has happened.”

Negotiating exit

Putin, who was in Brasilia for a summit of emerging market powers, said “our doors are not closed to the negotiating process to exit this situation.”

The U.S. and EU are seeking to raise the price for Russia’s actions. The Russian economy just skirted a recession last quarter, as capital markets seized up while the U.S. and EU clamped down on individuals and companies tied to Putin’s inner circle.

The benchmark Micex Index entered a bear market on March 13 after Putin moved to annex Crimea and before a referendum in which people in the Black Sea peninsula voted to break away from Ukraine. The gauge has since advanced 18%.

The Finance Ministry warned last week that growth will slow to a crawl if stiffer sanctions are imposed. The ruble fell the most in two weeks in the offshore market after the U.S. and EU announcements.

“These sanctions get the Russians’ attention,” Steven Pifer, a former U.S. ambassador to Ukraine and senior fellow at the Brookings Institution’s Center for 21st Century Security and Intelligence in Washington, said in an interview. “You’re now targeting major companies -- Rosneft, Novatek and now the Gazprombank.”

OAO Gazprom, the main supplier of gas to Europe through Ukrainian pipelines, wasn’t included in the sanctions.

Future sanctions

“What they’re trying to do is find a way to ratchet up the sanctions while holding something in reserve,” Pifer said of the U.S. actions. “They’re trying to do this in a graduated way.”

ExxonMobil Corp. and Rosneft had been set to start their first Arctic well this year, targeting a deposit that may hold more oil than Norway’s North Sea. In return, Rosneft has the option of buying into Exxon’s portfolio of exploratory projects in the U.S. Gulf of Mexico, west Texas and the Canadian province of Alberta.

Alan Jeffers, an ExxonMobil spokesman, declined to comment on whether the new round of sanctions will disrupt the Texas-based oil producer’s exploration partnership with Moscow-based Rosneft, which produces 5 percent of the world’s oil.

Rosneft CEO

Rosneft CEO Igor Sechin told reporters in Brasilia that the company can fund its long-term projects without loans and that the penalties wouldn’t affect its current projects with ExxonMobil.

Morgan Stanley agreed in December to sell its oil-merchanting business to Rosneft. The sale received U.S. antitrust approval last month and Morgan Stanley CEO James Gorman said a week earlier that he expected the deal to be completed by the end of September.

Mark Lake, a spokesman for the New York-based bank, declined to comment on how the sanctions might affect the deal.

There will be a longer-term impact on Rosneft as it looks to roll over debt, said Anders Aslund, a senior fellow at the Peterson Institute for International Economics in Washington. Rosneft has $13.7 billion in loans coming due this year out of a total debt load of nearly $74 billion, Bloomberg data show.

“Rosneft is really on the limit with how much debt it has,” Aslund said. “I think they will be seriously squeezed in their development.”

U.S. businesses

The U.S. Chamber of Commerce and National Association of Manufacturers held a strategy session July 15 with representatives from about 20 U.S. companies. The Business Roundtable, an association of chief executive officers, will discuss the impact with its members today, according to people familiar with the sessions, who asked for anonymity because the discussions are private.

The U.S. action also blocks the assets of eight state-owned defense firms, including Kalashnikov Concern, which manufactures its namesake assault rifle. They also targeted four Russian officials, including a top aide to Putin and a commander in the security service.

Even with the threat of additional sanctions, Russia hasn’t backed down in Ukraine. U.S. Army Colonel Steve Warren, a Pentagon spokesman, said the Russian troop presence on the Ukraine border is “intimidating.”

“It’s been building steadily over the last several weeks,” he said. The Russian military “certainly has the capability to conduct operations on either side of the border.”