Russia faces new U.S., EU sanctions over Ukraine crisis

Russian President Vladimir Putin leaves the Life-giving Trinity church in Moscow, September 10, 2014. REUTERS/Alexei Druzhinin/RIA Novosti/Kremlin

By Adrian Croft and Arshad Mohammed BRUSSELS/WASHINGTON (Reuters) - European Union governments agreed on Thursday to begin their new sanctions against Russia over the Ukraine crisis on Friday but could lift them next month if Moscow abides by a fragile truce, while the United States prepared its own fresh sanctions. The steps are the latest by the United States and the EU following Russia's annexation of Crimea in March and what the West sees as an effort since then to further destabilize Ukraine by backing pro-Russian separatists with troops and arms. President Barack Obama said he will provide details on the new U.S. sanctions on Friday. The United States plans to sanction Sberbank, Russia's largest bank, and to further limit other Russian banks' access to U.S. capital, sources familiar with the matter said on Thursday. The 28 governments of EU member states last week agreed on the new sanctions against Russia but spent several days wrangling over their announcement and implementation. Russia's foreign ministry said the approval of the new EU penalties showed the European Union had "made its choice against" the current peace road map aimed at ending the worst confrontation between Moscow and the West since the Cold War. After EU ambassadors gave the go-ahead to the new sanctions to go into effect on Friday, European Council President Herman Van Rompuy said EU officials would conduct a review before the end of September of how the truce reached last week between Ukraine government forces and rebels was working. If Russia was complying, some or all sanctions could be lifted, he said. "If the situation on the ground so warrants," he said, officials may submit to EU leaders "proposals to amend, suspend or repeal the set of sanctions in force, in all or in part". That enticement to Moscow to cooperate, while immediately imposing new measures, reflects impatience on the part of some leaders not to pull punches after less than a week of the truce but also concern among others, especially those most heavily dependent on Russian trade, not to provoke Moscow's retaliation. The EU agreement on the timing of the sanctions followed a phone call on Thursday involving Van Rompuy, British Prime Minister David Cameron, German Chancellor Angela Merkel, French President Francois Hollande and Italian Prime Minister Matteo Renzi, Cameron's spokesman said in London. "If Russia genuinely reverses course, then of course the European Union and others will return to the subject, but there unfortunately has been very little evidence so far and that is why you have the European Union going ahead," the spokesman said. Western powers have accused Russia of sending tanks and troops into eastern Ukraine to prop up a rebellion by pro-Moscow separatists. The Kremlin denies that and has responded with its own sanctions and threats of more retaliation. 'A CHANGE OF DIRECTION' Britain's Europe Minister David Lidington said he told Russia's ambassador to London that EU sanctions were being imposed as a direct response to Russian actions and "would remain in place until we see evidence of a change of direction". Moscow would take comparable measures in response to new EU sanctions, Russian news agencies quoted a Foreign Ministry spokesman as saying. "Today, Brussels and the leaders of the EU nations need to give a clear answer to EU citizens as to why they are putting them under the risks of confrontation, economic stagnation and unemployment," the Russian ministry said in a statement. The Russian response could include caps on used car imports and other consumer goods, Kremlin economic aide Andrei Belousov was quoted by state-run RIA news agency as saying. But a Kremlin spokesman was quoted by the Interfax news agency as saying Russia is committed to helping enforce a peace initiative in Ukraine despite the new EU sanctions. Some European officials believe Moscow could use disruptions to the natural gas deliveries on which the EU depends as its trump card in the confrontation over Ukraine. Poland's state-controlled gas importer PGNiG said on Thursday it had received 45 percent less natural gas than it requested from Russia's Gazprom on Wednesday. Although Gazprom said Russian gas flows to Poland were unchanged from the previous week, Poland said later that Gazprom had promised to deliver contracted gas supplies to PGNiG on Friday. Slovak Prime Minister Robert Fico said he had asked officials to determine the reason for a drop of around 10 percent in supplies of Russian gas to Slovakia in recent days. Ukraine imports around half of its gas needs from Russia, and the EU meets a third of its demand through imports from Russia, with 40 percent of that gas flowing through Ukraine. The new EU sanctions are expected to put Russia's top oil producers and pipeline operators, Rosneft, Transneft and Gazprom Neft, on a list of Russian state-owned firms that will not be allowed to raise capital or borrow on European markets, an EU diplomat said. EU sanctions do not include the gas sector and in particular state-owned Gazprom, the world's biggest gas producer and the biggest gas supplier to Europe. But under the EU penalties, firms in the bloc will be barred from providing drilling or well testing services for deepwater oil exploration, Arctic oil exploration or production and shale oil projects in Russia. Battle-tank maker Uralvagonzavod [URALG.UL], aerospace company Oboronprom and state-controlled United Aircraft Corp (UAC) are also expected to face sanctions, according to a draft obtained by Reuters. The EU sanctions would prohibit the companies from raising capital in Europe via "financial instruments with a maturity exceeding 30 days," the draft document said. An earlier round of EU sanctions barred EU nationals and companies from buying or selling new bonds or equity with a maturity of more than 90 days issued by major state-owned Russian banks: Sberbank, VTB Bank, Gazprombank, Vnesheconombank (VEB) and Russian Agriculture Bank (Rosselkhozbank). Under the new sanctions, EU nationals and companies may no longer provide loans to the five banks. Trade in new bonds or equity with a maturity exceeding 30 days, issued by the same banks, will now be prohibited. The EU will offer Russia more time to adjust to a European trade pact with Ukraine at talks with Ukraine and Russia in Brussels on Friday, diplomats say. (Additional reporting by Kylie MacLellan in London, Andreas Rinke in Berlin, Jan Strupczewski, Robin Emmott, Julia Fioretti, Alastair Macdonald, Francesco Guarascio in Brussels; Writing by Will Dunham; Editing by Jonathan Oatis)