Financial News

  • 31 July 2014, 11:02

Russia Sanctions 'Will Hit UK Economy'

Economic sanctions targeting Russia in the wake of the downing of flight MH17 will hit the UK economy, Foreign Secretary Philip Hammond has warned.

Mr Hammond was speaking to Sky News after Europe and the US agreed new measures against Vladimir Putin following the disaster, which has been blamed on Moscow-backed rebels in Ukraine.

New European Union restrictions include an arms embargo, a ban on the sale of bonds and equities in European capital markets by state-owned Russian banks and a ban on the sale of dual use and sensitive technologies.

Four key members of the Russian president's inner circle are among eight officials who are expected to face asset freezes and travel bans as part of the EU sanctions package.

Russia has warned the sanctions will lead to higher energy prices and hit Poland with a potentially damaging ban on fruit and vegetable imports.

Mr Hammond told Sky's Sunrise programme that the measures had been "designed to maximise the impact on Russia and minimise the impact on EU economies".

He said: "It will affect our economy... but you can't make an omelette without breaking eggs, and if we want to impose economic pain on Russia in order to try to encourage it to behave properly in eastern Ukraine and to give access to the crash site, then we have to be prepared to take these measures."

He added: "We have spent a lot of time making sure the package is balanced so the pain is fairly shared across the big EU economies, but we can't expect to be able to do this without any impact at all on our own economies." 

The White House followed up the EU sanctions with a fresh round of measures targeting three Russian banks.

One of them, VTB Bank, has responded by claiming it is confident it will still be able to raise capital despite the new sanctions.

Russia's stock exchange rose on Wednesday following the announcement of the latest action against Moscow.

Russia also announced plans for a ban on most fruit and vegetable imports from Poland for "sanitary reasons", which it said could be extended to the entire EU.

Poland's agriculture ministry amounted to "political repression" in response to the sanctions imposed by Europe. 

Signs of concern have already emerged in the City about the possible blowback of Russia sanctions on the UK economy.

Energy giant BP - which owns a 20% stake in Russian oil firm Rosneft - warned that further international sanctions could have a "material adverse impact" on the company's business in Russia and its own financial position.

The sanctions were agreed as aviation bosses set up an international task force to deal with the risks of flying over war zones following the downing of flight MH17.

A safety conference involving more than 190 nations will take place in February under the auspices of the International Civil Aviation Organisation (ICAO).

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