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Visa and MasterCard suspended services for Bank Rossiya, whose main branch in St. Petersburg is shown here. / Elena Ignatyeva, AP

MOSCOW - Sanctions against Russian President Vladimir Putin's inner circle won't affect him, experts here say, but average Russians believe it is they who will feel the brunt of the economic penalties.

The United States and Europe have issued travel bans and asset freezes against 20 Russian officials and businessmen to deter the Kremlin from further aggression against Ukraine, where Russian troops have effectively taken over the province of Crimea.

"The position of officialdom and business is that these sanctions aren't hitting Russia very hard, while harsher economic sanctions are problematic for Western countries themselves," said Dmitry Danilov, head of the European security department at the Institute of Europe of the Russian Academy of Sciences.

The effects of the sanctions were felt in Moscow on Friday, where several banks said that Visa and MasterCard stopped providing services for payment transactions.

Visa and MasterCard suspended services on Friday for Bank Rossiya, whose shareholder, Yuri Kovalchuk, is widely reputed to be close to Putin. Both Kovalchuk and Bank Rossiya fell under the sanctions imposed Thursday.

The bank, ranked the 17th largest in Russia, provides services for 24,000 corporate clients and 470,000 private clients. Russia's SMP Bank, whose shareholders, Arkady and Boris Rotenberg, had been sanctioned, also said that Visa and MasterCard had suspended services for the bank's card holders.

The credit card companies resumed working with SMP on Saturday, Interfax quoted a bank representative as saying, because the sanctions had been imposed on shareholders but not on the bank itself.

However, credit card services at Bank Rossiya continued to be blocked. Ordinary Russians feared the fallout from the sanctions would trickle down to them.

"These sanctions are taking us back to central planning," said entrepreneur Sonya Sokolova, who heads the Zvuki.ru online music portal. "No one can punish Russia as much as it punishes itself."

Others who have grown accustomed to taking advantage of Western payment transaction services such as Visa and MasterCard fear that the problems could spread to other banks, with entrepreneurs asking who could be next after Kovalchuk and the Rotenberg brothers.

The problem will affect mostly regular workers, says Sokolova. Employees are increasingly asking that their salaries be transferred in cash, local entrepreneurs told Moscow news media.

Russia's RTS index fell 4.5% on Friday on news of the new round of Washington sanctions. But what Russians feared more than the sanctions themselves were the Russian government's response to the penalties.

A bill was introduced into Russia's parliament on Friday to ban transaction services that were based outside of Russia. While the draft was part of a bid to develop Russia's own transaction services, in effect it would mean that credit card companies such as Visa and MasterCard would not service clients in Russia.

"The fact that our banks use infrastructure that they cannot control carries a real threat for national security and makes it possible for Russian banks to be cut off from international payment services, in the manner which we have seen today," ITAR-TASS quoted lawmaker Vladislav Reznik, who introduced the bill, as saying on Friday.

"There is talk of creating a national payment transaction system, and what that means is that no one's deposits will be safe," said Sokolova, the entrepreneur. "Isolation will increase."

"From the standpoint of the average population, they will blame the West for this, not Putin," Sokolova said, noting that polls indicate Putin's popularity has skyrocketed since Russia intervened in Ukraine earlier this month.

Danilov said the current sanctions would not be very effective.

"There is no consensus on sanction within the European Union," which has a trade turnover of nearly $400 billion with Russia that many EU countries would not want to jeopardize.

"Given Russia's power structure, it's clear that business is oriented toward politics and they would have to adapt [to new political realities] in any case," Danilov said. "Business and officialdom are more concerned about the situation in Ukraine and their trade ties there than they are about the sanctions."

Putin laughed off the sanctions on Friday, joking that he would have to "stay away" from the 20 sanctioned officials. He warned that Russia can sanction, too, and has issued travel bans to Moscow against Western officials. He also pledged to open an account at Bank Rossiya out of solidarity.

Pro-Kremlin expert and adviser Sergei Markov said that average Russians would not really be affected by the sanctions.

"In fact, they will be enthusiastic about the sanctions, because they help solve one of Russia's key problem, that the elite is seen as stealing Russia's resources and taking them abroad," Markov said.

"These sanctions lower the dependence of Russia's business elite on the West. Washington's sanctions go in line with President Putin's policies of de-offshorization."



Copyright 2014 USATODAY.com

Read the original story: Russia won't be hit hard by sanctions, experts say

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