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By James G. Neuger, Daryna Krasnolutska and Ilya Arkhipov
Sept 12 2014
Russia threatened retaliation to a U.S. and European Union decision to stiffen sanctions against Moscow over Ukraine and may ban some imports including clothing and used cars.
The EU added 15 companies, including OAO Gazprom Neft, OAO Rosneft and OAO Transneft, and 24 people to the list of those affected by its sanctions against Russia. European companies and taxpayers “will have to pick up the costs” for the penalties, Dmitry Peskov, a spokesman for Russian PresidentVladimir Putin, told Interfax yesterday. President Barack Obama said yesterday the U.S. will also “deepen and broaden” its measures against Russia’s financial, energy and defense industries.
The moves raise the level of confrontation and follow reprisals last month, when the Russian leader banned a range of food imports after an earlier round of U.S. and European penalties. Putin denies any involvement in the fighting that broke out after he annexed Crimea in March in what has become the worst crisis between Russia and its former Cold War adversaries since the fall of the Berlin Wall.
“The current political risks, various restrictions and barriers are worsening the situation,” Putin said today in Dushanbe, Tajikistan. “They directly harm the global business climate and reduce trust in international trade and the financial system.
Under the new penalties published today in the Official Journal, the EU extended a ban on share or bond sales with a maturity of more than 30 days to the three energy companies and three industrial producers -- Oboronprom, Uralvagonzavod and United Aircraft Corp. Nine defense companies are subject a curb on the import of dual-use technology.
The targeted individuals include Rostec Corp. Chief Executive Officer Sergei Chemezov and Vladimir Zhirinovsky, a lawmaker in Russia’s lower house of parliament, as well as eight members of eastern Ukraine separatist groups and two Crimean officials.
Russia’s Economy Ministry drafted a list of goods that may be banned, including automobile imports, particularly used cars, as well as textiles and clothing, state-run RIA Novosti reported, citing Kremlin economic aide Andrei Belousov yesterday. The country was also weighing restrictions on overflights to the Asia-Pacific as a response to sanctions against Aeroflot’s low-cost unit Dobrolet.
The ruble weakened to a record for a second day. The currency retreated as much as 0.6 percent to 37.7265 per dollar before trading 0.4 percent lower at 11.35 a.m. in Moscow, bringing this week’s loss to 2 percent. Ten-year local-currency bonds retreated for a fifth day, sending the yield up two basis points to 9.78 percent.
The fighting in Ukraine has killed more than 3,000 people and driven more than 1 million from their homes, according to the United Nations. The Sept. 5 cease-fire continued to show signs of strain, with the separatists firing at checkpoints and the Donetsk airport overnight, Ukrainian military spokesman Oleksiy Dmytrashkovskyi said today.
Although Ukrainian authorities said separatists continued to fire on government positions, President Petro Poroshenko said Russia is beginning to withdraw troops from the border conflict zones.
The 28-member EU is offering to ease the restrictions once the Kremlin makes a good-faith effort to end the conflict.
“We have always stressed the reversibility and scalability of our restrictive measures,” EU President Herman Van Rompuy said in a statement from Brussels. A review of the cease-fire in eastern Ukraine by the end of September may lead to EU “proposals to amend, suspend or repeal the set of sanctions in force, in all or in part.”
The EU won’t spell out what it wants to see on the ground to justify an easing or lifting of sanctions, according to an official from the bloc who spoke on condition of anonymity. It also won’t predict exactly when this decision will be made. The review will cover all sanctions now in force.
The latest sanctions and the ones adopted in July run until end-July 2015, the official said. A unanimous decision by all 28 EU government will be required to renew them.
EU governments first voted for the sanctions on Sept. 5, laying bare the bloc’s divisions over Russia by putting the curbs on hold as the cease-fire between Ukraine and Russian-backed separatists kicked in. Some countries had argued that rushing ahead with the restrictions now would give the Kremlin a pretext to restart the fighting.
“It is certainly a difficult situation because every further set of sanctions can lead to counter reactions that we don’t know today,” Austrian Finance Minister Hans Joerg Schelling said today before the meeting of euro-area finance ministers in Milan, Italy.