RUSSIA ATTACKS EU

Russia lashed out at the EU for imposing broad sanctions against key sectors of its economy and warned that Europeans would pay with higher energy prices.

The angry statement from the foreign ministry reflects Moscow's frustration over the EU's decision to close ranks with the US to punish Russia for its role in the Ukraine crisis and raises the spectre of retaliation.

EU members agreed on Tuesday night to bar some Russian state banks from long-term financing in European capital markets, impose an embargo on trading arms and dual-use technology with Russia and restrict exports of energy-related equipment and technology to Russia.

The sanctions were the toughest yet in the months-long stand-off with Russia over Ukraine, and plunged relations between Moscow and the west to their lowest levels since the cold war.

"In the heat of the sanctions, Brussels willingly creates obstacles for the long-term co-operation with Russia in such key sectors as energy. That is a thoughtless, irresponsible step. It will inevitably drive up prices on the European energy market," the foreign ministry said in a statement.

It added that Moscow was "ashamed" at the EU's failure to stand up to the US and "play an independent role in global affairs".

Russian executives are concerned that anger at Europe, which Moscow had long regarded as friendlier than the US, could trigger drastic retaliation.

"It's very unfortunate. It's not a good day for Russia," said a senior executive at one of the banks targeted by sanctions. "I'm concerned [the Russian government] will do something back and start nationalising things like Exxon in Sakhalin."

The Ukraine crisis and rising tension with the west have boosted nationalist politicians who want to restrict foreign companies' influence in Russia. The communications ministry on Wednesday suggested that Apple and SAP disclose source code – key pieces of software fiercely guarded by technology firms – to the Russian government to reassure Moscow they were not spying on the country. On Tuesday, a ruling party lawmaker proposed banning the "big four" global accounting companies from Russia.

It remains unclear whether any of these radical ideas will be implemented. Yet signs are emerging that the stand-off is harming cross-border co-operation in the energy sector.

Tensions over the Ukraine crisis have prompted oil major Total to freeze its programme of buying shares in Russia's Novatek , although the French group said it was too early to gauge the full impact of tougher western sanctions. The French group owned 18 per cent of Russia's second-largest natural gas producer at the end of June.

"We stopped buying shares in Novatek the day of the [flight MH17] plane accident, considering all the uncertainties that this event could lead to," said Patrick de La Chevardiere, Total's chief financial officer.

Meanwhile, Alexander Nekipelov, chairman of the Rosneft board of directors, said Exxon might suspend its co-operation with the Russian state oil company.

"In the worst case scenario there could be a period of suspension in Exxon's participation in some projects, if there is no way out for them," he said.

Gerhard Roiss, chief executive of the Austrian energy company OMV , told the Financial Times that he was "concerned" about the crisis but still hopeful it would be possible to manage a de-escalation. OMV is one of the partners of Russian state company Gazprom on the South Stream pipeline project that could one day allow Russia to send gas to Europe without going through Ukraine.

ft.com