Russia May Aid Sanctioned Banks as MH17 Probe Stymied

July 30 (Bloomberg) -- Atul Lele, chief investment officer at Deltec International Group, discusses finding investment opportunities in conjunction with Russian sanctions and the moral and legal issues involved. He speaks with Tom Keene on “Bloomberg Surveillance.”

Russia’s central bank said it’s ready to help lenders targeted by the U.S. and Europe in their latest round of sanctions, as Dutch experts again abandoned an attempt to visit the crash site of Malaysian Air Flight 17.

European Union governments agreed yesterday on their most sweeping sanctions against Russia to date, barring state-owned banks from selling shares or bonds in Europe, restricting the export of equipment to modernize the oil industry and barring the sale of technology with military uses. The sanctions are an attempt to get President Vladimir Putin to back down in Ukraine.

“If necessary, adequate measures will be taken to support the said organizations with the view of protecting interests of their customers, depositors and creditors,” the central bank said in an English-language statement on its website today.

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The EU sanctions align the 28-member bloc with the actions taken by the U.S. With many European countries reliant on Russian oil and natural gas, the sanctions stopped short of the full-scale commercial warfare that could damage the European economy, which is still shaking off the euro debt crisis.

Dutch Investigators

Dutch investigators coordinated by the Organization for Security and Cooperation in Europe abandoned plans to reach the MH17 crash site from the city of Donetsk today because of what they said was heavy fighting. They’ve tried to reach the area to recover victims’ remains and investigate since July 26.

Photographer: Andrey Rudakov/Bloomberg

Pedestrians pass a map of the Crimean peninsula filled with the flag of the Russian Federation, near an advertisement for VTB Bank OJSC in Moscow on March 28, 2014. Close

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Photographer: Andrey Rudakov/Bloomberg

Pedestrians pass a map of the Crimean peninsula filled with the flag of the Russian Federation, near an advertisement for VTB Bank OJSC in Moscow on March 28, 2014.

A reconnaissance team determined “the situation on and along the route is too dangerous,” Pieter-Jaap Aalbersberg, who heads the mission, said in an e-mailed statement. “We’ll continue to try and reach the crash site in the coming days, but the questions remains whether the situation will become safer.”

Ukrainian officials have insisted government forces aren’t operating in a 20 kilometer (12 mile) radius surrounding the crash site. The government’s forces won’t fight for control of the crash site against the rebels, who have massed heavy artillery at new firing positions near the wreckage and are mining approaches to the area, Defense Ministry spokesman Andriy Lysenko said today.

Sanctions Impact

Waging Financial War

The new sanctions will “very quickly show impact,” German Economy and Energy Minister Sigmar Gabriel told reporters in Berlin today. Russia’s economy “isn’t in very good shape,” he said.

The EU is also set to announce today the names of eight more people and three organizations being blacklisted in earlier sanctions. The bloc’s measures were followed hours later by U.S. penalties against three Russian banks and a state-owned shipbuilder, adding to restrictions announced two weeks ago. The U.S. sanctions target VTB Bank (VTBR), Bank of Moscow and the Russian Agricultural Bank, as well as United Shipbuilding Corp.

Photographer: Mikhail Klimentyev/AFP via Getty Images

The sanctions by the U.S. and EU were the latest U.S. response to Russian President Vladimir Putin’s refusal to end support for Ukrainian rebels. Close

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Photographer: Mikhail Klimentyev/AFP via Getty Images

The sanctions by the U.S. and EU were the latest U.S. response to Russian President Vladimir Putin’s refusal to end support for Ukrainian rebels.

The Group of Seven nations are discussing ways to coordinate sanctions applied to Russia, German government spokeswoman Christiane Wirtz said today at a news conference in Berlin. The G-7 includes Japan and Canada in addition to the U.S. and the four nations already taking part in EU sanctions.

Russia said the EU’s energy steps will cause higher prices in Europe and it will weigh the bloc’s “nonconstructive” attitude in future ties. The U.S. sanctions aren’t legitimate and will only worsen relations between the two countries, the Foreign Ministry in Moscow said in a statement.

‘Pretentious, Prosecutorial’

It said the White House was acting in a “pretentious, prosecutorial manner” to provide cover for what it called a “bloody operation” by Ukraine’s government.

“The real losses from such a destructive, shortsighted policy will be felt very acutely in Washington,” Russia’s Foreign Ministry said on its website.

Belarus President Aleksandr Lukashenko said he was willing to host talks on Ukraine. Lukashenko said he was responding to a request made by Ukrainian President Petro Poroshenko for discussions tomorrow in Minsk.

Investors are signaling concern about the impact of sanctions on Russia’s $2 trillion economy with government bonds headed for their worst monthly losses since May 2009.

Russian stocks gained and the ruble strengthened for the first time in five days as some investors saw U.S. and European Union sanctions as milder than anticipated.

The benchmark Micex Index (INDEXCF) slid 0.1 percent to 1,382.94, retreating from its strongest advance in more than a month. The ruble was 0.2 percent stronger against the central bank’s euro-dollar target basket in Moscow. Shares in OAO Sberbank, Russia’s biggest lender, have fallen more than 10 percent in the last month. The bank isn’t on the U.S. list.

Death Toll

Separately in Kiev, the state statistics office said on its website today that the nation’s economy shrank 4.7 percent year-on-year in the second quarter.

Ukraine’s army has had 363 killed and 1,434 wounded since its anti-separatist campaign began, Lysenko said. It made further advances, destroying insurgent bases and military equipment near the town of Makeevka, taking over the city of Avdiyivka and fighting to regain control of Pervomaysk in eastern Ukraine, the Defense Ministry said.

Government troops also discovered a route used to smuggle weapons across the border, and Russia is assisting with their delivery, Lysenko said. Seven tanks entered Ukraine from Russia last night and militants are readying to cross the border from Novoshakhtinsk.

The Donetsk regional administration said that 19 people died and 31 were wounded in the region during the last 24 hours. It didn’t specify if the victims were civilians or combatants.

To contact the reporters on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net; Volodymyr Verbyany in Kiev at vverbyany1@bloomberg.net

To contact the editors responsible for this story: Steven Komarow at skomarow1@bloomberg.net; James M. Gomez at jagomez@bloomberg.net Michael Winfrey, Leon Mangasarian

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