Russia decries widened US sanctions over Ukraine

President Vladimir Putin lamented the latest round of U.S. sanctions against Russia, saying that they are stalemating bilateral relations hours after President Barack Obama on Wednesday announced the most wide-ranging sanctions yet on the Russian economy, targeting key institutions including Gazprombank and Rosneft Oil Co., as well as other energy and defense companies.

Washington has steadily escalated its financial sanctions on Russia over what it views as Moscow's interference with its neighbor Ukraine and its annexation of the Crimea region. Obama said the United States could impose further sanctions if Russia did not take concrete steps to ease the conflict.

In his harshest words yet about future ties with Washington, Putin on Thursday said the sanctions would damage U.S. energy companies and bring relations to a "dead end." A Foreign Ministry official said Moscow would hit back in a way that would be "painful" for Washington.

The White House announcement deepened the most serious standoff between Moscow and the West since the end of the Cold War, as fighting between the Kiev government forces and pro-Russian separatists threatens to escalate into all-out civil war.

The targeted companies, run by President Vladimir Putin's allies — many of whom have become wealthy during his tenure — also include Novatek, Russia's second-largest gas producer, Vnesheconombank, or VEB, a state-owned bank that acts as payment agent for the Russian government, and eight arms firms, eight arms firms, including the producer of the Kalashnikov assault rifle.

The U.S. Treasury Department, which posted the sanctions on its website, said the measures effectively closed medium- and long-term dollar funding to the two banks and energy companies.

But the sanctions did not freeze the assets of those four companies or stop U.S. firms from doing business with them and several were quick to say it was business as usual. But Russia's rouble-traded stock market and the rouble tumbled on opening Thursday. 

Rosneft and Novatek were heavily hit, with both down more than 5 percent. The MICEX index was off more than 3 percent.

The chief executive of Russia's VTB bank warned of potentially devastating consequences for the global financial system from sanctions which he called illegal, echoing the sentiment of several Russian business leaders.

"Of course, these sanctions are inappropriate and of course they do not correspond to the spirit or the legal standards of existing international relations, in particular in the field of finance and banking," Andrei Kostin, whose bank is Russia's second largest, was quoted as saying by Itar-Tass news agency.

"I believe that if we do not take measures to stop such unilateral actions, we could see devastating consequences for the global financial system."

The sanctions stopped short of targeting Russia's Gazprom, the world's largest natural gas producer and provider of much of Europe's energy supplies. Gazprombank is 36 percent-owned by Gazprom.

"These sanctions are significant, but they are also targeted, designed to have the maximum impact on Russia while limiting any spillover impact on American companies or those of our allies," Obama told reporters.

The new measures were announced on the same day that European Union leaders met in Brussels and agreed to expand their own sanctions on Russia. 

The new U.S. sanctions also target Feodosiya Enterprises, a shipping facility in Crimea, and senior Russian officials, several of whom had already been signaled out by the European Union.

The affected senior officials included the deputy head of the State Duma, or parliament, the minister of the Crimea, a commander of the Russian intelligence agency FSB, and a Ukrainian separatist leader.

The measures put Putin's allies in focus. Rosneft is led by Igor Sechin, a friend of the Russian leaders since the 1990s and Novatek is run by Gennady Timchenko, who is said by political opponents to have been helped by Putin in creating his former Gunvor oil trading empire.

The sanctions were "unjustified, subjective and unlawful, because the company has no role in the Ukraine crisis,"said Sechin, who is with Putin in Brazill. Gazprombank declined to comment. Novatek was not available for comment. VEB declined to comment. Morgan Stanley, which is selling the majority of its global physical oil trading operations to Rosneft, declined to comment.

"We have emphasized our preference to resolve this issue diplomatically," Obama said. "We have to see concrete actions, not just words, that Russia in fact is committed to trying to end this conflict."

He said Russia had continued to support separatists in east Ukraine, sending fighters and weapons across the border.

Russia called the sanctions outrageous and unacceptable, and threatened retaliation after Washington and the EU ramped up punitive measures against Moscow over the Ukraine crisis.

"The US administration's new decision to enforce sanctions against a number of Russian legal entities and individuals under a far-fetched, false pretext cannot be called anything other than outrageous and fully unacceptable," deputy foreign minister Sergei Ryabkov told the Interfax news agency.

He added that Russia would retaliate but did not provide details.

"We condemn those politicians and officials who are behind such actions and confirm our intention to adopt measures which will be perceived in Washington rather painfully and acutely," Ryabkov said.

"We are not after an immediate effect; we are not going to copy the methods of the U.S. administration that provoke rejection; we will not yield to provocation and act in a calm manner," he added.

Obama in recent weeks has repeatedly threatened new sanctions and appears to have run out of patience as fighting continues to rage in eastern Ukraine.

The new sanctions were unlikely to please Republican lawmakers, many of whom have been calling for the imposition of sanctions on entire Russian industries, rather than specific companies, as the best way to control Russian Putin.

Washington said on Wednesday that up to 12,000 Russian forces were back on the border with Ukraine and that weaponry was crossing over to pro-Russian separatists.

"These are combat forces," Pentagon spokesman Colonel Steve Warren told reporters.

The increase in the Russian presence occurred several weeks after Moscow had drawn down its forces in the area to about 1,000 troops.

Wire services