Barack Obama has joined the European Union in sharply escalating economic pressure on Moscow for its ongoing support of Ukranian separatists in the wake of the shooting down of Malaysia Airlines flight MH17.

The latest American measures targeted major sectors of the Russian economy, including weapons, energy and finance. Three large banks – VTB Bank OAO, Bank of Moscow and the Russian Agricultural Bank – were cut off from the US economy.



“Today, Russia is once again isolating itself from the international community, setting back decades of genuine progress,” the president said.

But Obama denied that the US had turned the clock back to the Soviet era in its relations with Russia. “It’s not a new cold war. What it is is a very specific issue related to Russia’s unwillingness to recognize that Ukraine can chart its own path,” Obama said on Tuesday, hours after the European Union enacted new sanctions on the Russians.

The EU decided that Moscow had not fulfilled the conditions laid down by foreign ministers last week, to stop the supply of arms to the rebels and provide full cooperation in the investigation into the shooting down of flight MH17. It announced a series of measures against sectors of the Russian economy that amounted to its most punitive sanctions since the end of the cold war.

Officials in Washington said that Russia continued to supply armored vehicles and artillery, including air defence systems and rockets, to their separatist proxies in Ukraine that have wrested control of much of south and east of the country from the government in Kiev, which is supported by the EU and the US.

While the US continues to stop short of providing the Ukrainian military with lethal aid, Obama administration officials said that the latest round of sanctions would build upon $100m-worth of capital flight already seen in the months since Russia annexed Crimea and would prevent Russia from making technological leaps necessary for future energy development.

“We have seen sanctions bring the Russian economy to a standstill through a large and broad-based deterioration of Russian financial assets; capital flight that already exceeds all of last year; and a significant increase in Russian borrowing costs,” the US Treasury secretary, Jack Lew, said in a statement.

Lew said that the US could impose additional sanctions if Vladimir Putin did not deescalate the conflict.

A senior US official told reporters that the new wave of sanctions were the “sectoral sanctions” that Washington has threatened to enact for months, indicating that the joint action with Europe could be the strongest economic gambit the transatlantic allies possess against Moscow.

“We will certainly want the impact of these sanctions to sink in and to test Russia’s willingness and capacity to take the path of deescalation,” the official said, briefing reporters on condition of anonymity, a custom of the Obama administration.



“We always have additional sanctions available to us, but I think this a very significant step that you’ve heard us describe as the United States and Europe moving into sectoral sanctions together.”

The president of the European council, Herman Van Rompuy, and the head of the European commission, José Manuel Barroso, issued a joint statement describing the EU measures as a strong warning that “Illegal annexation of territory and deliberate destabilisation of a neighbouring sovereign country could not be accepted in 21st-century Europe“.

“When the violence created spirals out of control and leads to the killing of almost 300 innocent civilians in their flight from the Netherlands to Malaysia, the situation requires urgent and determined response,” they said. “The European Union will fulfil its obligations to protect and ensure the security of its citizens. And the European Union will stand by its neighbours and partners.”

According to an EU official, the most important measure agreed was to deny Russian state-owned banks access to European capital markets. Under the agreed sanctions, Europeans will not be permitted to buy debt, equity or other financial instruments with a maturity higher than 90 days in Russian state-owned banks or their subsidiaries. Brokering or other services linked to any such transactions will also banned.

Any trade in arms and “related material” with Russia, both import and export, will be banned but the embargo will apply to future contracts only, and therefore would not affect the €1.2bn sale of two French Mistral helicopter carrier ships already agreed. Russia imports relatively few arms from the EU, but sells Europe weapons worth more than €3bn.

Certain technologies related to the energy industry will require specific prior authorisation, and export permits will not be given for exploration or production equipment for deep-water or Arctic drilling or for shale oil projects in Russia.

Even as the Obama administration has recast its relationship with Russia – a warm one in Obama’s first term – it remains hopeful that Russia will cooperate with it on important foreign policy priorities, particularly pressing Iran on a deal to forego nuclear weapons.

Obama accordingly signalled that an easing of tensions was possible, but hinged on Russia’s commitment to back away from the violence that has destabilized Ukraine and killed nearly 300 people on board MH17.



“It didn’t have to come to this,” Obama said. “This is a choice that Russia and President Putin in particular has made. There continues to be a better choice, a choice of de-escalation, the choice of joining the world in a diplomatic solution to this situation, a choice in which Russia recognizes that it can be a neighbor and trading partner with Ukraine even as Ukraine is also developing ties with Europe and other parts of the world.”

The White House earlier welcomed the introduction of sectoral sanctions in Europe, a move it has been advocating for months. “The announcement that we anticipate later today from the Europeans is the culmination of months of diplomatic work that has been done by this administration,” said Josh Earnest, the White House press secretary.



In London, a No 10 spokesman said the UK expected the Netherlands to publish the preliminary findings of its investigation into the crash of MH17 next week.

“In the Netherlands, the process for identifying and repatriating the victims continues and there are now 15 British police officers working as part of a 200-strong team to complete the process as swiftly as possible,” the spokesman said.



“The prime minister underlined the need for a strong international response to Russia’s ongoing efforts to destabilise Ukraine, noting that the EU should agree a package of sectoral sanctions today and that Europe must be willing to pursue further tough measures if Russia does not change course.”