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Armed pro-Russian separatists stand guard as monitors from the Organization for Security and Co-operation in Europe and members of a Malaysian air crash investigations team inspect the crash site of Malaysia Airlines Flight 17 near the village of Grabovo, Donetsk region, on July 22, 2014. (MAXIM ZMEYEV/REUTERS)
Armed pro-Russian separatists stand guard as monitors from the Organization for Security and Co-operation in Europe and members of a Malaysian air crash investigations team inspect the crash site of Malaysia Airlines Flight 17 near the village of Grabovo, Donetsk region, on July 22, 2014. (MAXIM ZMEYEV/REUTERS)

MH17: EU talks tougher sanctions for Russia to target banks Add to ...

The European Union would target state-owned Russian banks and their ability to finance Moscow’s faltering economy in its most serious sanctions so far over the Ukraine crisis under proposals considered by EU governments on Thursday, diplomats said.

After months of hesitation, powerful EU states including Germany, Moscow’s biggest trade partner, are now pushing for quick action as they believe Russia has consistently failed to meet international demands to end violence in Ukraine. The downing of Malaysia Airlines Flight 17 in an area of Ukraine held by Russian-backed separatists has stiffened Europe’s resolve, officials said.

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Russia continued to deny Kiev’s allegations it was involved in the MH17 disaster on Thursday, while Australia – a nation that lost 37 citizens on the plane – sent police to London to assist in a potential UN team to secure the plane-crash site.

BRUSSELS: EUROPE WEIGHS OPTIONS TO PUNISH RUSSIA

Ambassadors of the 28-nation bloc met in Brussels to discuss options drafted by the executive European Commission in response to the downing of a Malaysian airliner in an area of eastern Ukraine held by Russian-backed separatists.

The proposals include:

  • Debt and banks: European investors would be banned from buying new debt or shares of banks owned 50 per cent or more by the state. These banks raised almost half of their €15.8-billion ($21.29-billion) capital needs in EU markets last year.
  • Arms embargo: Diplomats said an embargo would apply to future deals and would not bar delivery of a French helicopter carrier built for Russia under a 2011 contract.
  • Export restrictions: The EU is considering restricting exports of technology for deep-sea drilling, shale gas and Arctic energy exploration under one of the options, diplomats said.

The proposals to restrict access to EU capital markets and defence and energy technology would mark the first time the Europeans have gone beyond asset freezes and visa bans to target sensitive sectors of the Russian economy.

In response to the conflict in Ukraine, the Unites States has for several months been imposing sanctions on Russian individuals and smaller companies. But on July 16, Washington hit Russia’s largest oil producer, Rosneft; its second largest gas producer, Novatek; and its third largest bank, Gazprombank. All are run by Putin allies who have become wealthy during his tenure.

The latest U.S. sanctions against Russia violate World Trade Organization rules and may force Moscow into a destabilizing trade dispute, Russia’s ambassador told the Geneva-based trade body on Thursday. “It looks like we are being forced to seek the protection of our legitimate rights and interests through the WTO mechanisms,” Ambassador Gennady Ovechko said, adding that Russia was also concerned by sanctions taken by other WTO members.

AUSTRALIA: POLICE SENT TO AID UN IN SECURING CRASH SITE

Australia has sent 50 police to London in anticipation of deploying them to Ukraine to secure the Malaysian plane crash site as part of a potential UN team that’s under consideration, the Australian Prime Minister said Thursday.

Prime Minister Tony Abbott said he accepted “there is potential for difficulty” in deploying police in an area of eastern Ukraine held by pro-Russian separatists who are suspected to have shot down the airliner. He said that the task of the international police team would be to ensure a full and thorough search of the site so that all victims’ remains were recovered and sent to the Netherlands for identification. The search would also gather evidence for a criminal investigation headed by the Netherlands.

Abbott said he had personally spoken overnight with Ukraine President Petro Poroshenko and Russian President Vladimir Putin about the need to secure the site where the Malaysia Airlines Boeing 777 was downed by a surface-to-air missile last week. “President Putin gave me assurances that he wanted to see the families of the victims satisfied. He wanted to see, as a father himself, grieving families given closure.”

MOSCOW: RUSSIA DENIES SHOOTING DOWN KIEV’S JETS

Russia’s Defence Ministry denied on Thursday a Ukraine security council statement that missiles that brought down two of its fighter jets on Wednesday may have been fired from Russia, Interfax news agency reported, citing a defence ministry official.

“In an attempt to mislead the public, to distract attention from the Malaysian Boeing 777 catastrophe, the fantasies of Kiev’s authorities deserve inclusion in the Red Book of military aphorisms,” the unnamed source was quoted as saying.

The two Ukrainian fighter jets were shot down not far from the site where MH17 was brought down last week. Citing preliminary information, Kiev said the missiles that brought down at least one of the fighter jets on Wednesday could have been fired from Russia. On Thursday, a spokesman for Ukraine’s Security Council softened the line, saying Kiev was not “accusing anyone” and was only looking at possible versions. The spokesman, Andriy Lysenko, said the jets’ pilots survived the crash.

DONETSK: POWER OUTAGES AS KIEV PRESSES REBELS

Artillery fire echoed in the south and northwest of rebel-held Donetsk in eastern Ukraine on Thursday and one district near the city was without electricity as Ukrainian forces pressed a military campaign against pro-Russian separatists.

The rebels ordered the removal of all vehicles in a square near the train station, and local authorities said damage to dozens of electricity substations had left at least one district, Petrovsky, without electricity.

Ukraine’s army has forced the rebels back to their two main strongholds of Donetsk and Luhansk, taking villages and suburbs around them, and officials said they were continuing to abandon positions outside the cities. “We are noticing the further strengthening ... of attacking positions and defense, as well as the movement of armored vehicles into towns around Donetsk, in Horlivka and Ilovaisk,” the Ukrainian military said in a statement on Thursday.

DONETSK: REBEL LEADER CONFIRMS SEPARATISTS HAD ANTI-AIRCRAFT MISSILES

In an interview with Reuters on Tuesday, A powerful Ukrainian rebel leader has confirmed that pro-Russian separatists had an anti-aircraft missile of the type Washington says was used to shoot down MH17 and it could have originated in Russia.

Alexander Khodakovsky, commander of the Vostok Battalion, acknowledged for the first time since the airliner was brought down that the rebels did possess the BUK missile system and said it could have been sent back subsequently to remove proof of its presence.

Before the Malaysian plane was shot down, rebels had boasted of obtaining the BUK missiles, which can shoot down airliners at cruising height. But since the disaster the separatists’ main group, the self-proclaimed Donetsk People’s Republic, has repeatedly denied ever having possessed such weapons.

Khodakovsky accused the Kiev authorities for provoking what may have been the missile strike that destroyed the doomed airliner, saying Kiev had deliberately launched air strikes in the area, knowing the missiles were in place.

Eileen Lainez, a Pentagon spokeswoman, said Khodakovsky’s remarks confirmed what U.S. officials had long been saying, that “Russian-backed separatists have received arms, training and support from Russia.” But she dismissed the rebel leader’s efforts to blame the Kiev government for the downing of the airliner, calling it “another attempt to try to muddy the water and move the focus from facts.”

Washington believes that pro-Russian separatists most likely shot down the airliner “by mistake,” not realizing it was a civilian passenger flight, U.S. intelligence officials said.

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