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 In eastern Ukraine, a Dutch recovery team called off its work at
the site where Malaysian airliner MH 17 was shot down over rebel
held territory last month, saying the frontline location had become
too dangerous.
Ukraine said the halt to the recovery meant it would stop observing
a ceasefire at the site, where it is battling rebels that the West
says are armed and funded by Moscow.
Russian share prices fell after the announcement of Moscow's one
year ban on all meat, fish, dairy, fruit and vegetables from the
United States, the 28 European Union countries, Canada, Australia
and non-EU member Norway.
Russia bought $43 billion worth of food last year. It has become by
far the biggest consumer of EU fruit and vegetables, the second
biggest buyer of U.S. poultry and a major global consumer of fish,
meat and dairy.
President Vladimir Putin ordered his government to adopt the
measures to retaliate against Western countries who imposed
sanctions on Russia's defense, oil and financial sectors over its
support for rebels waging an insurrection in east Ukraine.
He had promised to ensure that the measures would not hurt Russian
consumers, which suggested he might exclude some popular products.
But in the end, the bans announced by his prime minister, Dmitry
Medvedev, mentioned no exceptions.
The announcement saw Russian bond yields rise to their highest
levels in years and Moscow's already reeling share prices extend a
sell-off.
Agriculture Minister Nikolai Fyodorov acknowledged that the measures
would cause a short-term spike in inflation, but said he did not see
a danger in the medium or long term. He said Russia would compensate
with more imports of products from other suppliers such as Brazilian
meat and New Zealand cheese.
The EU's executive Commission said it reserved the right to take
action to retaliate against the Russian ban.
Farmers in specific sectors in Western producing countries are
likely to suffer, but much of the pain will be borne by Russians,
who will face higher prices and shortages of some goods, with
inflation already rising, the rouble falling and the economy hurt by
capital flight.
"The first casualties would be the domestic market. However it will
have some implications for the farmers in the producing countries,"
Abdolreza Abbassian, a senior economist with the United Nations Food
and Agriculture Organization, said.
Russians have relished imported food since the fall of the Soviet
Union, when year-round supplies of fresh fruit and vegetables
arrived and ubiquitous cheap American frozen chicken quarters became
known as "Bush's legs" after the then president.
The nascent middle class in Moscow, which buys Italian cheese and
American beef at supermarkets, will take a hit, but so will ordinary
people who buy Polish apples and Greek cucumbers in street markets.
Russia bought 28 percent of EU fruit exports and 21.5 percent of its
vegetables in 2011. It bought 8 percent of U.S. chicken meat exports
last year.
TIT-FOR-TAT
Moscow may also ban Western airlines from flying transit routes over
its air space, a measure that would cost European airlines money
burning extra fuel to avoid Russia on flights to Asia, but would
also deprive Moscow of hundreds of millions of dollars in overflight
fees.
Western countries imposed initially mild sanctions on Russia after
it annexed Ukraine's Crimea peninsula in March, but tightened them
after a Malaysian airliner was shot down over pro-Russian rebel-held
territory in east Ukraine on July 17.
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The latest Western measures limit access by Russian state banks to
global capital markets and also block imports of defense and oil
industry equipment. Washington and Brussels say the Malaysian
airliner was almost certainly shot down by an advanced anti-aircraft
missile system supplied to the rebels by Russia. Moscow denies this.
The disaster galvanized politicians, particularly in Europe, who had
previously been reluctant to take strong action against a big
trading partner.
Dutch inspectors are trying to examine the site to investigate the
cause of the disaster and recover any remains of the personal
effects and bodies of the 298 victims of the crash. Their visit has
been hampered by fighting in the area, which is near the road
linking the two main rebel bastions Donetsk and Luhansk near the
Russian frontier.
Kiev said it would lift a ceasefire imposed in the area as long as
the Dutch had halted their work. Ukrainian military spokesman Andriy
Lysenko said seven more Ukrainian service members had been killed in
the past day of fighting.
The rebels are led almost exclusively by Russian citizens and are
armed with tanks, artillery and other heavy weapons that Kiev and
its Western allies say can only have come from the Russian side of
the border.
They have declared independent "people's republics" in two
industrial provinces of eastern Ukraine which they call "New Russia"
a term Putin applied to all of Ukraine's south and east, where most
of the population, though identifying themselves as Ukrainians,
speak Russian as a native language.
Despite their advanced weapons, the rebels have steadily lost ground
since June, leaving them mainly besieged inside two provincial
capitals, along with hundreds of thousands of civilians who fear a
full-scale government assault.
Russia has announced military exercises near the border this week.
On Wednesday, NATO said Moscow had amassed 20,000 troops near the
frontier and could be planning a ground invasion under the pretext
of launching a humanitarian mission.
Putin has rallied Russians with relentless nationalist campaigns in
state media against Ukraine and in support of the rebel cause, and
Western officials fear he might invade to prevent a humiliating
rebel defeat.
(Additional reporting by Reuters Moscow, Richard Balmforth in Kiev,
Maria Tsvetkova in Donetsk, Barbara Lewis in Brussels, Isla Binnie
in Rome; Writing by Peter Graff; editing by Janet McBride)
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