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Russia defiant in face of new U.S. sanctions over Ukraine

By Laura Smith-Spark and Alla Eshchenko, CNN
July 17, 2014 -- Updated 1251 GMT (2051 HKT)
STORY HIGHLIGHTS
  • NEW: "Russia will pay for the war it started against Ukraine," says Ukrainian Prime Minister
  • "Sanctions are evil," says Russian Prime Minister Dmitry Medvedev
  • Russian Foreign Ministry says it won't tolerate blackmail, may take countermeasures
  • Report: Ukrainian official says Russia shot down a Ukrainian jet in its own airspace

Moscow (CNN) -- Russian leaders reacted angrily Thursday to President Barack Obama's decision to slap further sanctions on Russian banks, energy firms and defense companies over Russia's actions in Ukraine.

"Sanctions are evil," said Prime Minister Dmitry Medvedev, as he warned that the steps taken by Washington and the European Union would lead to worsening relations -- and possible Russian retaliation.

Russia's Foreign Ministry warned that it would not "tolerate blackmail" and reserved the right to take countermeasures, according to the state-run RIA Novosti news agency.

Deputy Prime Minister Dmitry Rogozin was similarly defiant, tweeting: "The sanctions imposed by Washington on Russian defense sector majors are unlawful and demonstrate that the U.S. is engaged in unfair competition on the arms market.

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"Anyway, the Americans cannot put a lid on the ongoing re-arming of the Russian armed forces or shatter the export potential of our defense sector."

As deadly violence continues to roil eastern Ukraine, European Union leaders also said they intended to increase sanctions, signaling growing Western concern about Russia's continued support for the separatists battling the Ukrainian military.

Ukrainian jet 'shot down'

Tensions between Ukraine and its larger neighbor showed no sign of easing Thursday, as Ukrainian officials reportedly accused a Russian fighter of shooting down a Ukrainian jet the previous evening while it was flying in Ukrainian airspace.

"A military plane of the Russian Armed Forces launched a missile strike against an Su-25 aircraft of the Ukrainian Armed Forces, which performed tasks on Ukrainian territory," Ukraine's National Security and Defense Council spokesman Andriy Lysenko was quoted as saying by the official Ukrinform news agency.

"Our plane was shot down," he said, adding that the pilot ejected and was picked up safely by Ukrainian forces.

In response to the expanded sanctions, Ukrainian Prime Minister Arseniy Yatsenyuk in Kiev had tough words for Russia.

"It is time to pay for violating the international law, military aggression, constant supply of weapons from Russia to the territory of Ukraine, financing militants who kill civilians and try to destroy Ukraine," he said.

"Russia will pay for the war it started against Ukraine."

The Pentagon said Wednesday that Russia now had 12,000 troops on the border with Ukraine, as well as some heavy weapons. The troop numbers had fallen to about 1,000 previously from a high of an estimated 40,000 forces earlier this year.

Ukraine's government has accused Russia of allowing weapons and military equipment, including tanks, to cross the border illegally into the hands of pro-Russian separatists.

Western officials have leveled the same charges at Moscow and urged it to act to ease the situation or face economic consequences and increased diplomatic isolation.

Medvedev: We'll take measures in response

However, Moscow insists that the West's sanctions will only worsen the situation.

"They never bring success to those who implement them," Medvedev said of sanctions, as he addressed the government in remarks broadcast on Russia 24.

"So-called sectoral sanctions implemented by the United States unfortunately will lead to a growth of anti-American and anti-EU mood in Russia. We will come back to the 1980s. It's sad. If that's our partner's goal, then they achieved it."

Medvedev said Russia would have to look at its financing for defense and security measures in light of the pressure being put on it.

"If our partners carry on sanctions, we'll take measures against foreign companies and people in response," he warned. "These sanctions won't help Ukraine."

His words echoed a warning by Russian President Vladimir Putin on Wednesday that the sanctions are already harming ties between his nation and the United States.

"They generally have a boomerang effect and, without a doubt, in this case, are driving the Russian-U.S. relations into a stalemate and seriously damaging them," he said, according to a Kremlin transcript of his remarks to reporters on a visit to Brazil.

"I am certain that this is harmful to the U.S. Administration and American people's long-term strategic national interests."

He accused the United States of pushing Ukrainian authorities toward a continued conflict, whereas Russia wants to see an immediate end to hostilities and a negotiated solution involving all sides, he said.

Financing squeeze, assets freeze

Announcing the sanctions Wednesday at the White House, Obama said, "We have to see concrete actions, and not just words that Russia in fact is committed to trying to end this conflict along the Russia-Ukraine border."

With the new sanctions, "what we are expecting is that the Russian leadership will see once again that its actions in Ukraine have consequences, including a weakening economy and increasing diplomatic isolation," he said.

The expanded U.S. measures target two Russian banks -- Gazprom Bank and VEB -- and two energy companies -- Novatek and Rosneft.

They will not be able to get new medium- and long-term financing in the United States, senior administration officials told reporters in a conference call.

In addition, the new sanctions freeze any U.S. assets and prohibit American business contacts for eight Russian arms companies that make weapons, including small arms, mortars and surface-to-air missiles. One of the eight is the Kalashnikov Concern, maker of the AK-47 assault rifle and other arms.

Also on the list: Four Russian government officials, including the minister of Crimean affairs; the self-styled Luhansk People's Republic and Donetsk People's Republic leading the separatist campaign in eastern Ukraine; and Aleksandr Borodai, the self-declared "Prime Minister" of the Donetsk group.

Targeting the separatist groups that simulate government structures prevents them from seeking financing, the senior administration officials noted.

A statement published on the EU website Wednesday said the European Council would decide by the end of July on which entities and individuals to target with expanded sanctions over their actions in Ukraine.

The council also asked the EU Commission to reassess EU-Russia cooperation programs, with a view to deciding, on a case-by-case basis, on suspending their implementation.

"The European Council urges the Russian Federation to actively use its influence over the illegally armed groups and to stop the flow of weapons and militants across the border, in order to achieve a rapid deescalation," the statement said.

Earlier this year, the United States and Europe imposed a range of sanctions in response to Russia's annexation of Crimea this spring and massing of troops along Ukraine's eastern border. The earlier sanctions included asset freezes and travel bans.

READ: Ukraine begins military offensive as cease-fire ends

READ: Man detained over murder of Russian TV anchor

READ: At least 4 escaped from downed Ukraine plane near Russian border

CNN's Alla Eshchenko reported from Moscow and Laura Smith-Spark wrote in London. CNN's Jim Acosta, Barbara Starr and Tom Cohen contributed to this report, as did Victoria Butenko in Kiev.

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