ELEANOR HALL: The European Union and the United States are
imposing the strongest sanctions against Russia since the Cold War in an attempt
to prevent further destabilisation of Ukraine.
The sanctions will now hit Russian banks and its energy and defence sectors.
Russia's president Vladimir Putin denies that he is supplying weapons to fuel the civil war.
But US president Barack Obama says Russia must pay an economic price for meddling in Ukraine and should brace for an even bigger hit if it continues to support the rebels.
North America correspondent Jane Cowan reports.
JANE COWAN: Standing on the south lawn of the White House in front of the presidential helicopter, Barack Obama announced the latest effort to force Russian president Vladimir Putin to end his support for Ukrainian rebels.
BARACK OBAMA: Today, I'm building on the measures we announced two weeks ago.
The United States is imposing new sanctions in key sectors of the Russian economy - energy, arms and finance.
We're blocking the exports of specific goods and technologies to the Russian energy sector, we're expanding our sanctions to more Russian banks and defence companies, and we're formally suspending credit that encourages exports to Russia and financing for economic development projects in Russia.
JANE COWAN: Barack Obama made the move as the European Union approved dramatically tougher economic sanctions, the strongest against Russia since the Cold War, with the potential to sway Russian decision-making in a way previous penalties haven't.
Russia's economy relies heavily on Europe as a market for its oil and gas, a source of financing, and as a supplier of military components.
Russia's withstood earlier sanctions but since the shooting down of the Malaysian Airlines jet, the Russian stock market has tumbled.
The US president:
BARACK OBAMA: In the financial sector, the EU is cutting off certain financing to state-owned banks in Russia.
In the energy sector, the EU will stop exporting specific goods and technologies to Russia, which will make it more difficult for Russia to develop its oil resources over the long term.
In the defence sector, the EU is prohibiting new arms imports and exports, and it's halting the export of sensitive technology to Russia's military users.
And because we're closely coordinating our actions with Europe, the sanctions we're announcing today will have an even bigger bite.
JANE COWAN: The announcements were the result of an intense lobbying effort from Barack Obama.
He was asked whether a new Cold War had begun between Russia and the eest.
BARACK OBAMA: 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.
If Russia continues on its current path, the cost on Russia will continue to grow.
And today is a reminder that the United States means what it says, and we will rally the international community in standing up for the rights and freedom of people around the world.
JANE COWAN: Earlier America's top diplomat John Kerry met at the State Department with his Ukrainian counterpart, lamenting the failure to secure the scene of the crash, 10 days after Flight 17 came to grief in a field of sunflowers.
JOHN KERRY: The site has to be cordoned off, the evidence has to be preserved, and Russia needs to use its considerable influence among the separatists in order to be able to help ensure this basic approach of common decency.
The Ukrainian foreign minister Pavlo Klimkin.
PAVLO KLIMKIN: What counts and what is critical is reaching the bilateral ceasefire with the aim of restoring the territorial integrity of Ukraine, and it's also the issue of human dignity.
JANE COWAN: In Canada the airline industry grappled with how to reassure the 3.3 billion people who'll board planes this year.
TWT 1 - RUSSIA SANCTIONSTONY TYLER: There's no mistaking that what happened to MH17 was a tragedy that should not have happened. And it exposed a gap in the system.
JANE COWAN: Tony Tyler heads the International
Air Transport Association, representing 240 airlines.
TONY TYLER: The system is not broken. It works extremely well in the vast majority of cases.
I believe that passengers travelling today can rest in the confidence that this is not something that has anything above a tiny, tiny probability of happening.
JANE COWAN: He called on governments to share intelligence so airlines can make decisions about which routes are safe.
TONY TYLER: But the fact is intelligence agencies have information, we believe they have it, they have to share it.
It is very clearly government responsibility to declare whether a route is safe or not.
JANE COWAN: He said countries had no excuse for not ensuring the safety of their airspaces and providing accurate data, making the point that even sensitive information can be declassified so that sources aren't compromised.
In Washington this is Jane Cowan for The World Today.
CHRIS UHLMANN: The United States and European Union have combined
to ratchet up the pressure on Russia for backing rebels in Ukraine's civil
They've announced sanctions that hit Russian banks, defence ties and its energy industry and are aimed at making Moscow pay a heavy economic price for destabilising its neighbour.
And president Barack Obama is now saying the Kremlin is a direct participant in the civil war, firing artillery across the border, sending in military equipment and massing its own troops.
With more on the sanctions I'm joined by our business editor Peter Ryan.
And Peter, just how significant are these sanctions and do people really believe that they'll bring president Putin to heel?
PETER RYAN: Well Chris, this morning's sanctions really do mark a new phase in what's now seen as the biggest confrontation between Moscow and the West since the Cold War.
Previously, sanctions had only focused on individuals and organisations close to Vladimir Putin. Now they've been widened quite dramatically to target Russian oil companies and there'll be restrictions on the export of equipment that's critical to modernising Russia's giant oil industry.
Russia's state-owned banks are also targeted; they'll be barred from raising money in European capital markets and simple daily things like buying and selling shares.
This includes the Bank of Moscow and the Russian Agricultural Bank.
The European Union outlined the tougher sanctions earlier this morning and the US president Barack Obama was out a little later warning that Russia is on the brink of international isolation.
BARACK OBAMA: The major sanctions we're announcing today will continue to ratchet up. The pressure on Russia, including the cronies and companies that are supporting Russia's illegal actions in Ukraine. In other words, today Russia is once again isolating itself from the international community, setting back decades of genuine progress.
And it doesn't have to come to this. It didn't have to come to this. It does not have to be this way. But this is a choice that Russia and president Putin in particular, has made. There continues to be a better choice, the choice of de-escalation, the choice of joining the world in a diplomatic solution to this situation.
CHRIS UHLMANN: US president Barack Obama.
And Peter there was a lot of arms twisting within the European Union about how tough the sanctions should be. What deals have been done to get the big players across the line?
PETER RYAN: Well Chris, this is all because the sanction won't only hurt Russia, they'll also hurt the European Union. And even though the new sanctions are only in place for an initial 90 days, this is as Europe is heading into its winter.
And while Russian oil has been targeted, its exports of natural gas which powers European industry has been spared.
France, perhaps controversially, has also been allowed to go ahead with the delivery of two warships to Russia; that's because these new sanctions won't affect previous contracts. And Germany had also been reluctant because of its trade links with Russia, but chancellor Angela Merkel has now agreed that the latest sanctions were unavoidable.
CHRIS UHLMANN: And how have the financial markets reacted to the news?
PETER RYAN: Well Chris, European markets had already closed before the news of these tougher sanctions was announced and Wall Street had also been in the black, but those gains were quickly neutralised in the final hour as the details of the sanctions were outlined and the Dow ended 0.4 per cent weaker.
But all of this new uncertainty adds up to a similar picture in Australia and Asia when the stock exchanges open across the region later this morning.
CHRIS UHLMANN: Business editor Peter Ryan, thank you.