Russia slams West over sanctions, ruble sinks

MOSCOW - New EU sanctions on Friday sank the ruble to a new low as Moscow accused the West of undermining the fragile truce in Ukraine and turning the heat on its Cold War-era foe.

The new EU punitive measures came in lockstep with fresh sanctions from the United States, and targeted major state firms as well as one of President Vladimir Putin's closest allies, Sergei Chemezov, head of Russian Technologies holding.

The ruble slumped to a new record for a second day, retreating to 37,93 against the dollar, as of 1225 GMT, while Moscow stock markets fell.

Putin, participating Friday in a security summit in Tajikistan alongside Chinese President Xi Jinping, remained notably silent on the subject of the sanctions.

His foreign minister, however, said they hurt chances of creating lasting peace in war-torn Ukraine.

"We believe that adopting such decisions at the very moment when the peace process in Ukraine is gaining strength -- we are hoping ... -- this means choosing a path towards undermining the peace process," said Sergei Lavrov.

"We will react in a calm and adequate manner, first and foremost proceeding from the need to protect our interests," Lavrov said on the sidelines of the Shanghai Cooperation Organisation in the Tajik capital Dushanbe.

A ceasefire signed last Friday between Kiev and separatist rebels in Ukraine's industrial heartland has so far held, despite accusations of violations on both sides.

In Moscow the speaker of parliament's lower house charged that the crisis served as an excuse for US President Barack Obama to drum up tensions with its Cold War-era foe.

"The sanctions announced by President Obama are already disconnected from reality," State Duma speaker Sergei Naryshkin said in televised remarks.

"For them, the most difficult internal Ukrainian conflict, crisis, confrontation, is just a pretext -- this is obvious," Naryshkin said.

"If it did not happen they would find another (excuse). This is sad but true."

Obama said on Thursday that Washington's sanctions would target the defence, finance and energy sectors in response to Russia's "illegal actions" in Ukraine.

The parliamentary speaker also warned the sanctions could hamper Ukraine's ceasefire.

"What are they thinking?" he said, referring to US officials.

Obama said Washington would detail its new sanctions on Friday. The EU measures that entered force earlier Friday focussed on major Russian oil firms including Rosneft, defence companies and state-owned banks.

'Russia will not budge'

Rosneft vice president Mikhail Leontyev said Western sanctions were becoming ever more "unjustified and illegal".

"What should we do with these sanctions?" he said on popular radio Echo of Moscow. "What does Rosneft have to do with it? What does deep-sea drilling have to do with the ceasefire?"

Sergei Karaganov, a prominent Kremlin-connected foreign policy expert at the Higher School of Economics, said fresh sanctions would do little to convince the Kremlin to change tack.

"It is a dead-end situation and Russia will not budge under pressure," he told AFP.

Yevgeny Nadorshin, chief economist at the AFK Sistema, said the previous and new sanctions are expected to slow down Russia's economy even further.

"With sanctions the probability of recession approaches 100 per cent, and it could start shortly," he told AFP.

"If sanctions are here to stay for a long time recession will be lengthier and will be felt deeper."

At the same time he said the situation was merely "cementing the status quo".

Sberbank, meanwhile, told its clients in a note to expect retaliatory measures from Russia to the sanctions.

"Such trade restrictions damage both Eurozone and Russian growth prospects and will keep the euro and the ruble pressured," it said.

Putin's aide Andrei Belousov said on Thursday Russia could retaliate by banning the import of used cars and clothes.