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 The United States added 20 names to its sanctions blacklist,
including Kremlin banker Yuri Kovalchuk and his Bank Rossiya, oil
and commodities trader Gennady Timchenko and the brothers Arkady and
Boris Rotenberg, who are linked to big contracts on gas pipelines
and the Sochi Olympics, as well as Putin's chief of staff and his
deputy, the head of military intelligence and a railways chief.
In one immediate consequence, U.S. credit card companies Visa and
MasterCard stopped providing services for payment transactions with
Russia's SMP bank, owned by the Rotenberg brothers, the bank said.
President Barack Obama said Washington was also considering
sanctions against key economic sectors including financial services,
oil and gas, metals and mining and the defense industry, if Russia
made military moves into eastern and southern Ukraine.
Diplomats said the mere mention of such a possibility would chill
investment in Russia, charging an immediate price for Moscow's
action in Crimea and serving as a potential deterrent to going
further.
The EU also extended its personal sanctions to another 12
middle-ranking Russian and Crimean officials.
Though the MICEX share index lurched about 3 percent lower when
trade opened, Putin mocked Obama's announcement of the visa bans and
asset freezes on the money men and security officials who
accompanied his rise from the mayor's office in Saint Petersburg in
the 1990s.
But he said Moscow should refrain from further retaliation against
the United States for now.
Prime Minister Dmitry Medvedev, however, made clear that Russia
would step up financial pressure on Ukraine.
He said the former Soviet republic should repay Moscow $11 billion
under a gas supply contact that should be scrapped because it no
longer applied.
Medvedev said the Kharkiv agreements under which Russia was to
provide cheap gas in return for the lease of the Sevastopol naval
base in Crimea were "subject to denunciation", giving Russia a legal
right to sue for money back from Ukraine.
Altogether, Kiev owed Moscow $16 billion, he added.
EU LEADERS MEETING
Russia's parliament rushed to complete ratification of the
annexation of the Black Sea region while European Union leaders met
in Brussels to discuss steps to reduce their long-term dependence on
Russian energy.
The Federation Council upper house approved a treaty on Friday
incorporating Crimea into Russia after the State Duma lower house
did so a day earlier.
The 28 EU leaders underlined their support for Ukraine's new
leadership, rejected as illegitimate by Moscow, by signing a
political agreement with interim Prime Minister Arseniy Yatseniuk
and promising financial aid as soon as Kiev reaches a deal with the
International Monetary Fund.
The signing "recognizes the aspirations of the people of Ukraine to
live in a country governed by values, by democracy and the rule of
law, where all citizens have a stake in national prosperity,"
European Council President Van Rompuy said at the ceremony. The
accord contained no offer of EU membership.
The IMF is to report next Tuesday on advanced talks with Ukraine on
a major loan program that would be linked to far-reaching reforms of
the former Soviet republic's shattered economy.
Polish Prime Minister Donald Tusk said the EU leaders were
discussing using their collective bargaining power to stop Russia
playing off European countries against each other in gas contacts.
Up to now, each EU state has negotiated its own deal with Moscow,
and some refuse even to share contract details with the European
Commission or EU partners.
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"We are working hard to make at least one step forward in the area
of making community purchases of energy," Tusk told reporters on
arrival for the second day of an EU summit. "In fact it is all
about making the EU stronger as a whole versus energy exporters, so
that we have a bigger bargaining power, so that we can act more as a
community. In simple terms, it is about common purchases of energy."
TUG OF WAR
An East-West tug-of-war has mounted since Russia occupied Crimea,
home to its Black Sea fleet and a majority of ethnic Russians,
following the overthrow of pro-Russian Ukrainian President Viktor
Yanukovich by street protests last month.
Three months of protests were triggered by Yanukovich's refusal to
sign an association agreement with the EU, the political part of
which was signed on Friday.
The EU leaders agreed to impose asset freezes and visa bans on 12
more mid-ranking Russian and Crimean officials and to consider wider
economic sanctions if Russia further destabilizes the situation in
Ukraine.
But they said Europe did not have a legal basis to extend the
personal sanctions against Putin associates without proof of their
direct involvement in the violation of Ukrainian sovereignty.
"Small measures in the EU are worth more than big measures in the
United States," a senior European official said, noting that EU
trade with Moscow was 10 times the U.S. volume.
"It's about cutting off Russia politically and diplomatically," the
official said, dismissing criticism that EU sanctions looked weaker
than the U.S. measures.
Russian Deputy Finance Minister Alexei Moiseev said he expected no
big immediate impact from western sanctions on Russia's financial
sector.
He also criticized the downgrading of Russia's credit outlook by
leading ratings agencies, saying there was no basis for the move. On
Thursday, S&P and Fitch revised to 'negative' from 'stable' their
long-term outlooks on Russia's debt.
"Our creditworthiness has not changed, of course. We're going to
have a budget this year that will be better than expected," Moiseev
said.
In one glimmer of diplomatic progress, Russian Foreign Minister
Sergei Lavrov said an agreement was near on sending a monitoring
mission by the pan-European OSCE security watchdog. The EU had
threatened to send its own monitors if Moscow continued to block a
mandate at the Organisation for Security and Cooperation in Europe.
(Additional reporting by Luke Baker, Adrian Croft, Jan Strupczewski
and Martin Santa in Brussels, Oksana Kobzeva, Lidia Kelly, Elizabeth
Piper and Steve Gutterman in Moscow; writing by Paul Taylor; editing
by Will Waterman)
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