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Russia warns EU sanctions will backfire
Last Updated: 2014-07-31 04:59 | Xinhua
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EU, U.S. step up sanctions against Russia

Russia said on Wednesday that the latest sanctions of the European Union (EU) against Russia run counter to rules of the World Trade Organization (WTO) and will have adverse effects on EU countries.

"The restrictive measures in the financial sphere will also have negative consequences for the EU members' banks operating in Russia," the ministry said in a statement, adding that the sectorial sanctions run counter to the WTO rules.

The EU has agreed on a package of "significant" additional restrictive measures targeting Russia's finance, defense and energy sectors, said the European Council on Tuesday.

The tougher sanctions will limit access of Russian state-owned financial institutions to EU capital markets, impose an arms embargo, establish an export ban on dual-use goods for military end users, and curtail Russian access to sensitive technologies particularly in the field of the oil sector.

The Russian ministry accused the EU of being manipulated by " Washington's dictation," warning that the bloc should get ready for serious economic costs of "doubtful geopolitical schemes." " Moscow is disappointed by the EU inability to play an independent role in global affairs," it said.

"The EU voluntarily creates obstacles for further cooperation with Russia in such a key sphere as energy, which is a thoughtless, irresponsible step. It will be the European energy market that pays the price," it said.

The ministry claimed that Russia will overcome possible economic difficulties to be caused by the new sanctions.

"The difficulties which could arise in certain sectors of the Russian economy will be surmounted. The efficiency and self- sufficiency of our economy will rise," it said.

The EU economy will suffer from no less negative effects than Russia's, the ministry said.

Moreover, the ministry said that the sanctions prove that the West is reluctant to settle the Ukraine crisis. "We have to acknowledge that there is an obvious lack of political will and reluctance in the EU to reach a solution to the crisis in Ukraine. "

Russian Foreign Minister Sergei Lavrov said during a visit to Tajikistan Wednesday that Russia will analyze the latest sanctions imposed by the West, adding that Moscow did all it could to defuse tensions in Ukraine.

Lavrov said that the latest round of sanctions came exactly when monitors of the Organization for Security and Cooperation in Europe (OSCE) started to observe the Russian-Ukrainian border areas at the request of the West.

"We know our interests and will firmly defend them with whatever means possible in accordance with the international law," he said.

Following its European allies, U.S. President Barack Obama on Tuesday announced an expansion of U.S. penalties targeting key sectors of Russia's economy.

Russia to back banks hit by new U.S. sanctions

Russia's central bank said Wednesday that it is ready to take measures to support the banks hit by new U.S. sanctions.

The U.S. Treasury Department on Tuesday announced sanctions against three state-owned Russian banks, namely the Bank of Moscow, the Russian Agricultural Bank and VTB Bank OAO.

"Adequate measures will be taken, if necessary, to support these organizations to protect the interests of their clients, depositors and creditors," the Itar-Tass news agency quoted the central bank as saying.

Moreover, the European Union (EU) on Tuesday agreed on a package of "significant" additional restrictive measures targeting Russia's finance, defense and energy sectors.

Chairman of Russian state oil company Rosneft Alexander Nekipelov on Wednesday said that recent sanctions adopted by the West will not critically affect the Russian oil sector.

"The sector is strong enough and will overcome the difficulties. Sanctions do not mean an immediate stop, and the work will go on," Nekipelov said, adding that some plans would probably be revised and some necessary alternatives would be taken.

Nekipelov also said it was "highly unlikely" for the U.S. ExxonMobil company to be forced to suspend or sharply restrict their cooperation.

The two companies just announced in May their joint development projects of four sea shelf deposits off Siberian northern shores.

"As far as we know, Exxon does not have plans to stop cooperation with Rosneft, and we hope the situation will not go that far," said Nekipelov.

Meanwhile, the European Business Association (EBA) said Wednesday that the new round of Western sanctions will not only harm Russian economy, but also restrict the economic growth of the EU and Ukraine.

The EBA "deeply regrets the new sanctions" and urged all the relevant parties of the Ukrainian conflict to make de-escalatory efforts, according to a press release.

Punitive measures from the EU, the United States and other Western countries are driven by allegations that Russia has been involved in the July 17 downing of Malaysia Airlines flight MH17, which killed all 298 people on board.

Sanctions against Russia to affect Finnish exports: Finnish Technology Industries

Sanctions against Russia will exert significant impact on the Finnish exports, estimated the Federation of Finnish Technology Industries on Wednesday.

Concerning the EU's new range of economic sanctions against Russia over the crisis in Ukraine, Finnish Prime Minister Alexander Stubb said on Tuesday that the latest sanctions will have no radical impact on the Finnish economy.

Experts from the Federation of Finnish Technology Industries, however, held different opinions.

Sanctions targeting the Russian financial market will obstruct the Russian state-owned financial enterprises' access to finance, and the impact will appear in the Finnish exports from autumn this year, the experts believed.

Mika Nykanen, director of industrial policy from the federation, told the daily Helsingin Sanomat on Wednesday that the sanctions targeting financial sectors will seriously affect Finnish exports to Russia.

According to Jorma Tutunen, managing director of the federation, many Finnish companies have already reported that their Russian customers' access to finance was more difficult, due to the deterioration of the Russian economy before sanctions were imposed.

Russian companies' difficult access to finance will have a significant impact on their ability to make investment, and Finnish companies' access to finance in Russia will also become problematic, Turunen told the daily.

Russia is the most important trade partner of Finland. Russia's share of Finland's exports last year was 10 percent. Jukka Palokangas, chief economist from the federation, estimated that the Finnish exports to Russia will drop in the next five years.

The experts were universally pessimistic about the Finnish perspective on trade with Russia, arguing that the long lasting economic recession, the impact of Russian sanctions and other factors will inevitably weaken the Finnish companies' operation in Russia.

Latvian companies urged to reorient to new markets following EU sanctions against Russia

Latvian Financial and Capital Market Commission (FCMC) expert noted the importance of the capability of these companies to reorient themselves to the new markets following new phase of EU sanctions against Russia.

Latvian President Andris Berzins called the new phase of EU sanctions against Russia to be "inevitable," LETA reported with reference to the president's press secretary Liga Krapane.

Andris Berzins considers EU sanctions agreed of Tuesday as the logical consequent step as well as inevitable in the context of Ukraine crisis that has not been developed by far.

The new sanctions are to come into force this Thursday and will go beyond asset freezing and visa bans, but will be more focused on the restriction of finance, defense and energy sectors.

The FCMC expert believes that these sanctions will have an indirect effect on the Latvian banking sector. FCMC explains the goal on the new sanctions as to ban access of the Russian state-run banks and companies to the financing on the European financial market.

The United States has already included Estonian branch of the "Moscow Bank" -- "Eesti Krediidipank" in the sanction list. It may have an indirect effect on the Estonian bank's branch in Latvia.

Estonian rail cargo volumes drop linked to sanctions

The cargo volumes of the Estonian Railways are expected to drop by one fourth this year, at least partly due to the economic sanctions against Russia, head of the Estonian railways said on Wednesday.

Ahti Asmann, chairman of the board of the Estonian Railways, said that over the year the reduced cargo quantity amounts to 15 million euros of revenue loss, according to the Estonian Public Broadcasting (ERR).

The Russian share of Estonian exports is 11 percent, according to data from May. Compared to last year, exports to Russia dropped by a fifth while imports from Russia during the same period increased over 40 percent.

Asmann said transport of goods via railroad is a geopolitical business, of which results are directly dependent on international relations between countries.

Sanctions against a trade partner affect the railroad business negatively, the official said.

"It is rather difficult to estimate how much of this decline is related to the sanctions, but taking into account that the goods exported eastwards were controlled by companies and people on the US blacklist, we can attribute all reduction in cargo volumes to the sanctions," Asmann was quoted by ERR as saying.

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