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Obama Says Putin Has Responsibility for Rebel Cooperation

July 21 (Bloomberg) -- President Barack Obama said Russian President Vladimir Putin has “direct responsibility” to compel separatists in Ukraine to let investigators recover remains and collect evidence from the Malaysian airliner crash site.

“The burden is now on Russia,” Obama said at the White House today. “Russia will only further isolate itself from the international community, and the costs for Russia’s behavior will only continue to increase.”

About an hour after Obama delivered his remarks, Malaysian Prime Minister Najib Razak said rebels in eastern Ukraine agreed to hand over bodies of crash victims and grant access to the crash site. The plane’s flight data recorders will be handed over to a Malaysian team in Donetsk tonight, he said.

The U.S. is pushing European governments to expand sanctions against Russia, even at some peril to their own economies, in an effort to break Putin’s support for the pro-Russian rebels in Ukraine. Obama and his advisers have concluded that evidence and world opinion are giving the U.S. greater leverage on Putin.

Putin has defied rising international anger over the downing of the airliner, suggesting leaders in the U.S. and Europe were using the incident for “selfish political gains.”

Separatist Interference

At the site of the crash in eastern Ukraine, less than 60 miles from the Russian border, armed pro-Russian rebels are preventing the departure of refrigerated train cars carrying corpses and body parts of crash victims, according to the government in Kiev. Ukrainian President Petro Poroshenko, on CNN, accused separatists of attempting to destroy evidence.

Putin again blamed the downing of the plane on the Ukraine conflict. “One can say with certainty that if the fighting hadn’t been resumed on June 28 in eastern Ukraine, this tragedy for sure wouldn’t have happened,” he said in a video posted on the Kremlin’s website after a series of phone calls yesterday with world leaders about the crash.

Obama said the insurgents have blocked international investigators from the crash site and are removing evidence. That, he said, raises the question: “What exactly are they trying to hide?”

Russia’s Influence

He repeatedly referred to the rebels as “Russian-backed,” trained and supported by Putin’s government. “Russia has extraordinary influence over these separatists,” he told reporters.

All 298 people on board Malaysian Airlines Flight MH17 were killed with the plane was hit by what U.S. and European authorities said was a surface-to-air missile fired from rebel-held territory.

Najib said the agreement to turn over remains and the so-called black boxes was reached with Alexander Borodai, prime minister of the self-proclaimed Donetsk People’s Republic.

“There is work still to be done, work which relies on continued communication in good faith,” Najib said.

The airline disaster follows months of U.S. efforts to persuade the Europeans to raise the costs on Putin for his efforts to destabilize Ukraine. Obama now is “absolutely prepared” to consider more sanctions, and the EU should do likewise, Secretary of State John Kerry said yesterday on ABC’s “This Week” program.

Targeted Sanctions

The U.S. last week imposed targeted sanctions on selected Russian banks, military, and energy companies including OAO Rosneft, Russia’s largest oil company, after the EU was unable to agree on more than limited additional sanctions.

The penalties have crimped Russia’s $2 trillion economy, which is teetering on the brink of a recession.

The Micex Index slid for a sixth day, losing 2.7 percent to 1,384.50 at the close in Moscow, producing a loss of 4.2 percent since Feb. 28, a day before Putin’s intervention in Crimea. U.S. exchange-traded funds that invest in Russia led net outflows of capital from emerging markets last week. Russia-focused ETFs lost $28.54 million in the five days through July 18, according to data compiled by Bloomberg.

EU ambassadors were set to have an emergency meeting on Ukraine today, and the bloc’s foreign ministers are scheduled to meet in Brussels tomorrow.

German Foreign Minister Frank-Walter Steinmeier said the EU’s 28 member states have to “increase pressure” on Russia, though tomorrow’s session will be “no easy meeting.” He said he didn’t expect a decision on further sanctions to be made.

Most of the victims of the disaster were from the Netherlands and Dutch authorities have asked EU members to avoid provoking Russia until the bodies are recovered, according to a U.K. official, who asked for anonymity because the discussions were private.

The threat of economic disruption from additional sanctions helped push European stocks down as well. The Stoxx Europe 600 Index fell 0.5 percent to 337.95 at the close in London. The gauge gained 0.8 percent last week as investors bet the Ukraine crisis was easing.

To contact the reporters on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net; Margaret Talev in Washington at mtalev@bloomberg.net

To contact the editors responsible for this story: Steven Komarow at skomarow1@bloomberg.net Joe Sobczyk

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