U.S. sanctions sour ties with Russia

By Guy Faulconbridge

U.S. sanctions against two leading Russian arms exporters mark a new low in chilly ties between the White House and the Kremlin and could scupper major potential trade deals with U.S. firms, the Russian press said on Monday.

The United States on Friday announced sanctions on seven firms from Russia, India, North Korea, and Cuba for selling restricted items to Iran, which Washington fears is trying to make nuclear weapons.

Sanctions were imposed on Russian state export agency Rosoboronexport — headed by a close friend of President Vladimir Putin — and state-owned warplane maker Sukhoi, meaning they can no longer work with U.S. firms.

"The imposition of sanctions against Rosoboronexport is practically a declaration of economic war against Russia," the Izvestia newspaper, owned by state-controlled gas giant Gazprom, said in a front-page story.

"The Strategic Partnership between the U.S. and Russia has Ended," the Kommersant daily said in its front page headline.

Putin and President Bush say they are friends but at a briefing during the Group of Eight summit in July Putin traded barbs with Bush over the state of democracy in Iraq. Bush raised concerns over Russian democracy privately with Putin.

Ties between Moscow and Washington have cooled since a high point after the September 11, 2001, attacks on the United States when Putin rushed to pledge solidarity with Bush in fighting terrorism.

Since then, differences over policy in the Middle East, gas supplies to Europe, accession to the World Trade Organization and competition for allies in the former Soviet Union have strained relations.

The State Department said sanctions were imposed after Washington obtained credible information that the companies had transferred materials to Iran since January 1, 1999, that could contribute to the development of weapons of mass destruction or missile systems.

Russia last year made a contract to sell Iran TOR-M1 ground-to-air missile systems and to modernize the Islamic Republic’s Russian fighters, bombers and military helicopters.

But Russian media said the sanctions were imposed because of Russia’s announcement last month of $3 billion in arms deals with Venezuela. Kommersant said special services analysts briefed Putin a month ago that the U.S. could use Moscow’s ties with Iran to impose sanctions for its deals with Venezuela.

Izvestia said the chilly ties could affect a whole range of major trade deals, including a decision by Russian flagship carrier Aeroflot on whether to award a $3 billion long-haul plane contract to Boeing or Airbus.

© 2006 Reuters