Russia denounces Ukraine's blockade and vows to defend banks

Russia has vowed to defend its banks against sanctions imposed by Ukraine and denounced a blockade of areas held by Moscow-backed separatists, saying the measures would only feed rising tension.

Ukraine imposed restrictions on five Kremlin-controlled banks on Thursday and began implementing an official ban on cargo traffic crossing the frontline in the eastern Donbas region, parts of which have been run for three years by local and Russian warlords.

"Of course, we will if necessary use all available and legal methods to defend the interests of our credit and financial institutions," said Kremlin spokesman Dmitry Peskov. "Really, the Ukraine situation is scary because of its tendency towards further deterioration and an increase in tension," he added.

“Economically, Ukraine is ceasing to be a reliable and predictable place for foreign and international investors,” Mr Peskov said, while describing the measures taken against Russian banks as “without doubt contrary to international law”.

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The five banks sanctioned are now banned from moving capital out of Ukraine, in what the country’s central bank called a bid to “protect the interests of these banks’ customers” and prevent any attempt “to siphon off funds abroad and transfer them to parent banks based in the Russian Federation”.

Ukrainian president Petro Poroshenko imposed the sanctions amid reports that passports issued by the separatists were now being accepted as official documents by Russian banks.

Law and taxes

He approved the ban on cargo crossing to and from the breakaway regions after militia leaders seized control this month of major coal mines, factories and other businesses still operating under Ukrainian law and paying taxes to Kiev.

Mr Poroshenko reiterated on Thursday that the blockade would last until the enterprises were returned to their legal owners and a ceasefire was established and heavy weapons were withdrawn from the frontline, in accordance with a largely defunct peace deal agreed in Minsk in 2015.

Shelling and casualties have increased again in recent months, dimming hopes for an end to a conflict that has killed about 10,000 people, displaced some 1.5 million, and prompted the West to impose economic sanctions on Russia.

France on Thursday joined Germany – a fellow broker of the so-called Minsk agreements – in expressing concern about the latest developments.

“Tensions have been heightened by the Russian authorities’ recent decision to recognise the official documents issued by the de-facto authorities of eastern Ukraine, as well as the illegal expropriation of Ukrainian businesses in certain parts of the Donetsk and Lugansk regions,” the foreign ministry in Paris said.

“France is also very concerned by the Ukrainian government’s decision . . . to impose a temporary blockade on the transportation of goods to the eastern part of the country. We call on the Ukrainian authorities to continue their efforts to lift the blockade of railroads at the contact line.”

The European Commission said it had signed off on a further €600 million for Ukraine, bringing total funding since 2014 to €2.81 billion, "the largest amount of macro-financial assistance the EU has disbursed to any non-EU country".