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US, EU stiffen sanctions against Russia over Ukraine

The United States and Europe significantly strengthened sanctions on Moscow over Ukraine on Wednesday, with Washington for the first time directly targeting Russia's banking, military and energy sectors.

WASHINGTON: The United States and Europe significantly strengthened sanctions on Moscow over Ukraine on Wednesday, with Washington for the first time directly targeting Russia's banking, military and energy sectors.

The new blows against Russia deepened the most serious standoff between Moscow and the West since the end of the Cold War, as fighting between the Kiev government and pro-Russian separatists threatened to escalate into all-out civil war.

Nearly 50 civilians have been killed in artillery and air strikes across the Russian-speaking eastern Ukrainian regions of Donetsk and Lugansk since the weekend that both sides blame on each other.

Kiev reported the deaths of 11 more servicemen overnight and warned that Russia had deployed thousands of troops along its entire border with Ukraine in preparation for a possible invasion.

The United States said it had no option but to act after Russia refused to take steps to halt both its support for separatists and the cross-border flow of weapons and materiel.

"We have moved to impose additional sanctions on Russia for its actions in violation of Ukraine's sovereignty and territorial integrity," said a senior US official on condition of anonymity.

President Barack Obama was due to make a televised statement on the Ukraine sanctions move and on other foreign policy issues, likely to include Iran nuclear talks, at 2115 GMT.

The US measures, Washington's most punitive move against Russia so far in the Ukraine crisis, struck directly at key sectors of the economy.

They included moves against two major Russian financial institutions, Gazprombank and VEB, and two giant Russian energy firms, OA Novatek and Rosneft, which will limit access to US capital markets.

The US Treasury also said that eight Russian arms firms that produce small armaments, mortar shells and tanks would also face direct sanctions.

The US list of sanctions also included measures against the self-styled breakaway Donetsk People's Republic and the Lugansk People's Republic in eastern Ukraine.

The United States acted as European leaders strengthened their own sanctions against Moscow, though the EU measures appeared to be less robust than those unveiled by Washington.

A diplomatic source in Brussels told AFP that the European Union would suspend new investments in Russia by the European Investment Bank (EIB) and the European Bank of Reconstruction and Development (EBRD).

"The situation in Ukraine is unacceptable," said British Prime Minister David Cameron, arriving for summit talks in Brussels -- before the new measures were announced.

"We need to send a very clear message with clear actions," he added.

Europe's measures come amid significant opposition to deeper punishments for Moscow in the European business community.

US officials however said that they believed the combined action by the transatlantic allies would impose a significant price on the Russian economy.

One official said that he could not rule out the possibility of the new sanctions tipping the Russian economy into a recession.

Washington had previously imposed sanctions against the leadership of some key Russian firms and enterprises and what it said were "cronies" around Russian President Vladimir Putin, as well as key leaders of the separatist movement.

More than three months of fighting in Ukraine has already claimed more than 600 lives.

Germany and France have been spearheading European efforts to revive a failed truce in Ukraine that would lead to peace negotiations and take some pressure off the bloc to punish Russia.

Ukrainian President Petro Poroshenko's attempts to set up a Skype videoconference on Tuesday with the separatists -- a conciliatory step previously agreed with Germany Chancellor Angela Merkel -- were rebuffed by the rebel command.

But senior rebel leaders said Wednesday that they had agreed to hold new European-mediated consultations with Kiev representatives by the weekend.

Merkel had earlier blamed Russia -- a country that she had spent her first years in office trying to coax into taking a cooperative approach with the West -- for the collapse of the peace talks.

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