EU slaps new economic sanctions on Russia

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BRUSSELS (AP) — The European Union has decided to slap new economic sanctions on Russia — including ones targeting the country's vital oil industry — for what it sees as Moscow's meddling in eastern Ukraine.

The sanctions will further curb access to European capital markets for Russian banks and firms, limit exports of certain high-technology goods and target more officials with travel bans and asset freezes, the EU said in statement.

The sanctions will take effect Friday following their publication in the EU's official journal but will be reversible if the situation in eastern Ukraine improves. A review of the measures will be carried out in late September, the EU said.

Russia's stock market and its currency tumbled on the news. Russia's benchmark MICEX, which was rising Thursday morning, was down 1.2 percent in the afternoon. The Russian ruble fell to an all-time low of 37.51 rubles against the U.S. dollar.

A summit of EU leaders almost two weeks ago called for the new sanctions, but the measure were twice postponed to assess the impact of a cease-fire in eastern Ukraine. The United States has said it was also considering new sanctions and was expected to follow suit on Friday.

The cease-fire between the Russian-backed separatists and the Ukrainian military took effect Friday but has been riddled by violations. On Thursday, two volleys of Grad rocket fire rang out in the rebel-held eastern city of Donetsk.

A spokesman for Ukraine's National Security and Defense Council, Col. Andriy Lysenko, told journalists that a large swath of Ukraine near the Sea of Azov had come under full rebel control. While the change likely happened before the cease-fire, it was an unusual admission by Ukraine of the scale of a coastal rebel offensive that Kiev and NATO say was backed by Russian arms and soldiers.

Russia denies the charge.

Ukrainian President Petro Poroshenko has sought to portray the cease-fire deal — reached as the rebels waged a major offensive that pushed back Ukraine's troops — as a victory rather than a defeat, saying Wednesday that about 70 percent of the Russian troops in eastern Ukraine had since withdrawn.

NATO, however, said Thursday that its intelligence still shows about 1,000 Russian troops with sophisticated weaponry like heavy artillery on Ukrainian soil. An estimated 20,000 other Russian troops are amassed just east of the border, the alliance said.

The new sanctions cut the EU's current ban on credits and loans to Russian entities from a maturity of more than 90 days now to those over 30 days. Curbing access to western capital markets could weigh down Russia's already-flagging economic growth.

In addition to hitting five of Russia's biggest banks, the EU said the capital market restrictions will now also hit three major Russian defense firms and three major energy companies. The names of the targeted entities will be released Friday.

The export of high-tech items that can be used for both military and civilian purposes — so-called dual-use goods — will also face further restrictions. In addition, 24 more individuals, including Russian decision-makers and oligarchs as well as rebel leaders from eastern Ukraine, will be banned from traveling to the 28-nation bloc and their assets will be frozen, the EU said.

That will bring the total number of people subject to EU sanctions to 119.

Overall, Brussels has been more reluctant than Washington to sanction Russia because of its broad economic ties. Moscow is an important gas supplier for many EU nations and it is the bloc's third-largest trading partner overall. The EU's sanctions, however, have more impact than those imposed by the U.S. since the EU is by far Russia's largest trading partner.

Matteo Napolitano, a director in Fitch Ratings' sovereign division, warned that the sanctions and the risk of further measures could see international banks further reduce their exposure to Russia, sparking renewed capital flight, slamming investment and depleting Moscow's foreign exchange reserves.

"The sanctions are really having a meaningful impact," he said at a conference in London.

In retaliation for earlier sanctions, Moscow banned food imports from the West, closing a market worth 10 billion euros ($13 billion) a year for European producers.

Russia has also issued a veiled threat that it could ban Western airlines from using Russian airspace. That could close an important overland flight route to Asia for European airlines, leading to higher fuel costs and delays.

In Ukraine's capital of Kiev on Thursday, people held posters and laid flowers to commemorate terror victims killed in the Sept. 11 attacks in the United States and in the July 17 downing of Malaysia Airlines Flight 17 over eastern Ukraine.

Ukraine has accused the separatists of shooting down Flight 17.


Nataliya Vasilyeva in Moscow, Peter Leonard in Donetsk, Laura Mills in Kiev, Ukraine, Pan Pylas in London and Julie Pace in Washington, D.C., contributed reporting.


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