Russia remained defiant Wednesday faced with the threat of tougher Western sanctions over the separatist insurgency in east Ukraine, warning that the measures would end up hurting the United States and the European Union as much as they do Russia.
So-called phase three or "sectoral" sanctions are those that target entire sectors of Russia's economy, rather than just key individuals or private entities.
Russia's foreign ministry said Washington was pursuing what it called a "destructive and short-sighted" sanctions policy.
Moscow said the US was seeking "a sole goal – to settle the score with us over independent policies that Washington finds inconvenient". It also accused the United States of adopting a "prosecutorial tone".
Moscow warned that the new wave of Western sanctions would drive up European Union energy prices and said they would hurt the bloc's economy as much as they will hurt Russia's.
"This is a thoughtless, irresponsible step. It will inevitably lead to an increase in prices on the European energy market," the Russian foreign ministry said in a statement.
Russia is a key supplier of natural gas to EU states and has often been accused of using gas prices as a political weapon.
"The economies of Russia and the European Union are communicating vessels and Brussels moving to third-phase sanctions will affect the economic situation in the EU no less than in Russia," said the ministry.
Economists have also warned that Europe's own economy would suffer from the new sectoral sanctions aimed at its biggest single source of energy supplies and a major trading partner.
Some EU diplomats have also expressed concerns, warning that tighter sanctions may convince Putin that he no longer has anything to lose by escalating the Ukraine conflict.
In a statement on Wednesday, the G7 group of economic powers – which comprises the United States, Britain, France, Germany, Canada, Italy and Japan – said Russia had undermined "Ukraine's sovereignty, territorial integrity and independence", and warned of more economic sanctions.
'Western credibility' at stake
The new sanctions will make it tougher for Russian state-owned banks to access European financial markets, forcing borrowing costs higher and hobbling an already struggling economy. EU citizens and banks will also be barred from purchasing certain bonds or stocks issued by state-owned Russian banks, according to EU officials.
Moscow has long insisted sanctions would merely bring Russians together and make its economy more self-reliant.
Russia's central bank said financial institutions were working normally and pledged to protect lenders hit by US sanctions, including the Bank of Moscow, the Russian Agricultural Bank and VTB, Russia’s second-largest bank.
First Deputy Prime Minister Igor Shuvalov made light of the restrictions on Wednesday.
"And what about the sanctions? In for a penny, in for a pound," he quipped to journalists.
Russian banks also put on a brave face, saying their operations would not be affected, while a top lawmaker, Alexei Pushkov, accused US President Barack Obama of starting "a new Cold War".
The US sanctions also targeted the United Shipbuilding Corporation, which builds attack submarines and warships.
The EU sanctions banned any future sales of weapons and dual-use technologies, especially in the key energy sector.
Until now the EU had restricted its response to asset freezes and visa bans on those implicated in or profiting from the Ukraine crisis, adding four close Putin business associates to the measures for the first time on Tuesday.
"These sanctions are harder than anything we have ever had before," James Nixey of British think tank Chatham House told Reuters. "It will hurt a little bit, but it's a down payment on the future security of Europe. It's a question of Western credibility."
Putin 'does not respond to pressure'
Despite the dismissive talk in Moscow, a number of economists acknowledged that the new restrictions would be painful for Russia and could stoke social tensions as its economy slides towards recession.
"The current amount of corporate debt is 700 billion dollars; these debts should be refinanced," Igor Nikolayev, head of the FBK Strategic Analysis Institute, told AFP, citing a lack of cheap loans in Russia.
Nikolai Petrov, of the Moscow-based Higher School of Economics, said ordinary Russians this time would feel the sanctions and predicted they would drive an even greater wedge between Russian President Vladimir Putin and the West.
"The confrontation will increase abruptly. Putin has been practically driven into a corner and this man does not make concessions under pressure," he told AFP.
Obama denied the accusations that the West was being drawn into a new Cold War with its former Soviet era foe, but warned that the United States and Europe were running out of patience with Putin's government.
Obama said Western powers were determined to act together on the Ukraine crisis in the wake of the shooting down of flight MH17, allegedly by Russian-armed separatists.
The Kremlin's response came as the Ukrainian military stepped up its offensive against pro-Russian rebels in the east of the country, retaking the town of Avdiyivka, which lies only 12 kilometres (8 miles) from the rebel stronghold of Donetsk.
Fighting between Kiev forces and rebels prevented a Dutch and Australian police contingent from visiting the MH17 crash site for the fourth day running.
The remains of some of the 298 victims, who included nearly 200 Dutch nationals, still lie at the site nearly two weeks on.
Kiev said its troops were pressing on with an offensive to take back towns near the downed jet, with a "mopping up" operation ongoing in the town of Ilovaysk, some 40 kilometres away.
Fighting also raged around another insurgent stronghold, Lugansk, where local authorities said one civilian died and 10 were injured in the past 24 hours.
(FRANCE 24 with AFP, REUTERS and AP)
Date created : 2014-07-30