Ukraine crisis: US and EU boost sanctions on Russia

A pro-Russian militant  looks at a destroyed house in Snizhne, eastern Ukraine The fighting has significantly escalated in eastern Ukraine in recent days

The US and EU have bolstered sanctions against Russia over its alleged support for separatists fighting in Ukraine.

The US has targeted major banks including Gazprombank, defence firms and energy companies including Rosneft.

Russian President Vladimir Putin was quoted as saying sanctions would take US-Russia relations to a "dead end".

Saying it would give sanction details by the end of July, the EU said it would ask its EIB investment bank no longer to fund Russian projects.

The new round of US sanctions announced by the US treasury significantly expands previous penalties by Washington, which were limited to individuals in Russia and Ukraine and a number of companies.

President Obama: "The Russian leadership will see once again that its actions in Ukraine have consequences"

As well as major banks and energy firms, the weapons manufacturer Kalashnikov Concern is also on the list.

Two self-proclaimed rebel entities in eastern Ukraine - the Donetsk People's Republic and the Luhansk People's Republic - are also targeted.

Grey line

Rajini Vaidyanathan, BBC News, Washington

The White House says these new sanctions are broad, flexible and potent. The inclusion of Russia's largest oil firm Rosneft, which signed a $1.5bn (£875m) deal with BP, is perhaps the most eye-catching.

The question is will they make the desired impact - hitting President Putin where it hurts, and getting him to "de-escalate" his actions in Ukraine.

This latest set of economic sanctions follows a round imposed earlier this year which the White House says have hurt Russia's economy. But they haven't tempered Russia, or President Putin's resolve.

On Tuesday the Pentagon said it had seen an increase in Russian troops at the border with Ukraine. With as many as 12,000 now there, it believes Russia is still supporting the separatist movement in the country. If this latest set of sanctions doesn't force Russia to scale down, what will?

Grey line

Speaking in Washington, US President Barack Obama said the sanctions were imposed because Russia had failed to fulfil its promises to de-escalate the crisis in Ukraine.

"These sanctions are significant, but they are also targeted, designed to have the maximum impact on Russia while limiting any spill-over impact on American companies or those of our allies," he told reporters.

Mr Obama also stressed US support for Ukraine, saying that "Ukrainians deserve to forge their own destiny".

Arseniy Yatsenyuk (C) speaks with servicemen during a visit to headquarters of Ukrainian forces near small Ukrainian city of Izyum, in Kharkiv region on July 16 Ukrainian Prime Minister Arseniy Yatsenyuk has been visiting areas close to the fighting
Men look at a building destroyed by the Ukrainian Air Force in Snezhnoye, 80 km east of Donetsk, on July 16 Cities across the east have sustained severe damage

The US penalties stop short of a complete disengagement with sectors of the Russian economy - a step that US officials said was being held in reserve in case Moscow launches a military invasion of Ukraine.

Mr Putin, on a visit to Brazil, told reporters: "Sanctions have a boomerang effect and without any doubt they will push U.S.-Russian relations into a dead end, and cause very serious damage."

In Brussels, the EU leaders agreed to beef up their own sanctions against Russia.

They said the list of "entities and persons" affected would be announced by the end of July.

The EU leaders said they would ask the EU-owned European Investment Bank (EIB) to suspend new investments in Russia.

They would, they added, also seek a suspension of new lending by the European Bank for Reconstruction and Development (EBRD), which includes both EU and non-EU shareholders.

Meanwhile in Ukraine itself, heavy fighting continued in the east.

Ukrainian officials said 11 soldiers died in the space of 24 hours. The number of casualties among pro-Russian separatists was not immediately known.

More than 1,000 civilians and combatants have been killed since mid-April, when Ukrainian security forces moved to regain control of the eastern regions, while tens of thousands of people have fled.

The crisis has led to the most serious standoff between Russia and the West since the end of the Cold War.

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