Russia Weighs Response as U.S. and EU Add More Sanctions
Russia will react “calmly, appropriately” to the EU sanctions, Foreign Minister Sergei Lavrov told state TV in an interview. The EU added 15 companies, including OAO Gazprom (OGZD) Neft, OAO Rosneft (ROSN) and OAO Transneft, and 24 people to the list of those affected by its sanctions against Russia. The U.S. will also “deepen and broaden” its measures against Russia’s financial, energy and defense industries, President Barack Obama said yesterday.
The moves raise the level of confrontation and follow reprisals last month, when Russia banned a range of food imports after an earlier round of U.S. and European penalties. Russian President Vladimir 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 communism.
“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.”
New Penalties
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 to a curb on imports 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.
To slap more sanctions on Russia as the peace process in Ukraine “starts to be sustainable, means to choose a path to undermine the peace process,” Lavrov said. We’ll react “calmly, appropriately. We will act to protect our own interests.”
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. It was also weighing restrictions on overflights to the Asia-Pacific as a response to sanctions against Aeroflot’s low-cost unit Dobrolet.
Ruble Weakens
The ruble weakened to a record for a second day. The currency retreated as much as 0.6 percent to 37.7265 before trading 0.4 percent lower at 1:40 p.m. in Moscow, bringing this week’s loss to 2 percent. Government bonds due in February 2027 rose for the first time in five days, sending the yield four basis points lower to 9.68 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 still showed signs of strain, with the separatists firing at checkpoints and the Donetsk airport overnight, Ukrainian military spokesman Oleksiy Dmytrashkovskyi said. Overnight shelling also damaged buildings in Donetsk and local pipelines, the city council said on its website.
Troop Withdrawal
President Petro Poroshenko said in Kiev that Russian troop withdrawal from Ukraine’s conflict zone has halted and urged for it to continue.Poroshenko demanded that Russia and the rebels immediately release all prisoners. The rebels are preparing for a next swap of prisoners in two days, Interfax reported, citing Andrei Purgin, an official of the self-proclaimed Donetsk people’s republic.
Ukraine is “hoping” for special status within NATO and needs peace to restart investments and the economy, Poroshenko said, vowing to regain control of Crimea one day.
“There can be no compromise on territorial integrity and the independence of Ukraine,” he said.
Ukraine was preparing a law that envisions regional elections to be held alongside parliamentary elections next month that would also guarantee the use of the Russian language in the rebel-held areas, presidential adviser Yuriy Lutsenko told reporters.
The 28-member EU is offering to ease the sanctions once the Kremlin makes a good-faith effort to end the conflict.
Reversing Measures
“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.
“Only if Russia significantly and verifiably implements the peace plan can the sanctions be withdrawn,” German Foreign Minister Frank-Walter Steinmeier said in an interview with Passauer Neue Presse newspaper. “We’ve seen too often in the past months that Moscow promises much, but its actions haven’t contributed to an easing of the situation in eastern Ukraine.”
Sanctions run until the end of July 2015, the official said. A unanimous decision by all 28 EU governments will be required to renew them.
Some EU countries had argued that rushing ahead with the restrictions 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.
To contact the reporters on this story: James G. Neuger in Brussels at jneuger@bloomberg.net; Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net; Ilya Arkhipov in Moscow at iarkhipov@bloomberg.net
To contact the editors responsible for this story: James M. Gomez at jagomez@bloomberg.net; Balazs Penz at bpenz@bloomberg.net; Alan Crawford at acrawford6@bloomberg.net Andrea Dudik, Balazs Penz