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Obama, EU poised to hit Russian economy hard

BRUSSELS -- The United States and the European Union are preparing a powerful one-two punch against the Russian economy, with EU ambassadors meeting Tuesday to discuss a dramatic escalation in the trade bloc's sanctions on Russia.

Measures under consideration include limiting Russia's access to European capital markets and halting trade in arms and dual-use and sensitive technologies.

Reuters reports European Union governments reached a deal on Tuesday to impose economic sanctions against Russia, targeting its oil industry, defense, dual-use goods and sensitive technologies, diplomats said. The sanctions will be reviewed after three months, one diplomat told Reuters.

Ina press conference with his Ukrainian counterpart Tuesday, Secretary of State John Kerry called the behavior of the Moscow-backed Ukrainian separatists "unacceptable," especially considering there were still remains of passengers from the shot-down Malaysia Airlines Flight 17 still scattered and unsecured in territory they control.

"Russia needs to use its considerable influence among the separatists," Kerry said. "We and our European partners will take real measures if necessary."

In a rare videoconference call with President Obama, the leaders of Britain, Germany, Italy and France expressed their willingness Monday to adopt new sanctions against Russia in coordination with the United States, an official French statement said.

U.S. officials: Russia has fired into Ukraine

The Western nations are demanding Russia halt the alleged supply of arms to Ukrainian separatists and other actions that destabilize the situation in eastern Ukraine.

The show of Western solidarity comes as the U.S. accuses Russia of ramping up its troop presence on its border with Ukraine and shipping more heavy weaponry to the pro-Moscow rebels.

"It's precisely because we've not yet seen a strategic turn from (Russian President Vladimir) Putin that we believe it's absolutely essential to take additional measures, and that's what the Europeans and the United States intend to do this week," said Tony Blinken, Mr. Obama's deputy national security adviser.

Russia's leaders have staunchly denied supporting the rebels in Ukraine, and Foreign Minister Sergey Lavrov said Monday that any new sanctions would fail to influence the Kremlin in any direction.

"I assure you, we will overcome any difficulties that may arise in certain areas of the economy, and maybe we will become more independent and more confident in our own strength," Lavrov said in Moscow, according to the Reuters news agency.

Russian Foreign Minister Sergey Lavrov
Russian Foreign Minister Sergey Lavrov speaks during a news conference in Moscow, July 28, 2014. REUTERS

"We can't ignore it," he said, but suggested Moscow would not respond with its own sanctions against the West.

"To fall into hysterics and respond to a blow with a blow is not worthy of a major country," he told reporters.

Europe, which has a stronger trade relationship with Russia than the U.S., had lagged behind Washington with its earlier sanctions package, in part out of concern from leaders that the penalties could hurt their own economies. But a spokesman for British Prime Minister David Cameron said following Monday's call that the West agreed that the EU should adopt a "strong package of sectoral sanctions as swiftly as possible."

Obama escalates economic sanctions against Russia

CBS News senior White House correspondent Bill Plante was told Monday by a senior administration official that Washington intended to wait and see what specific sanctions its partners in the EU actually managed to agree to before hammering out any new punitive measures at the Treasury.

According to the official, if the Europeans were to make good on their promise to bring tough new measures, the U.S. would follow suit later in the week with an elaboration of the U.S. sanctions announced two weeks ago.

The teleconference on Monday night came amid concerns within the administration that the Europeans were backsliding on their vows to hit Russia's economy hard over Putin's role in Ukraine, said Plante.

Russia's economy is already struggling to cope under the weight of sanctions already imposed on many companies and individuals. The government says the economy grew a tiny bit in the last quarter, which has allowed the nation to avoid a technical recession, but capital is flowing out of the country at an alarming rate, and growth forecasts for the year are dismal.

The new round of sanctions from Europe and the EU are expected to target vast swathes of the Russian economy in a way that current measures have not, which could have a far more significant impact.