Russia's largest banks seek to reassure investors over EU moves that cut off access to capital markets, VTB saying they're ''incompatible' with a free market, while Moscow announces bans on certain EU food imports. Joel Flynn reports on the gathering momentum of Moscow's response to Western sanctions.
The fallout from Russia's involvement in Ukraine continues. Its largest lenders seeking to assure clients and investors new EU sanctions won't hurt. Sberbank, VTB and Russia's third largest state bank, Gazprombank are among five lenders cut off from raising funds in Europe's capital markets. The banks deny the move will hurt liquidity - but that could be all talk. Antonio Timoner-Salva is from IHS. SOUNDBITE: IHS Banking Risk Services Senior Economist, Antonio Timoner-Salva, saying (English): "Russian banks will have difficulties trying to obtain affordable funding, funding costs will rise because they will only have to come to a domestic wholesale markets for funding and these are becoming increasingly tight because of the capital outflows. So that will result in more costly loans and more difficult credit conditions for households and Russian corporations." Sberbank says the sanctions "violate the foundations of the global finance system". The Russian economy is already reeling. Vladimir Putin is reported introducing a sales tax on consumers to raise funds and begin to combat Russia's deepening financial woes. That's after Moscow banned imports of Polish fruit and vegetables, a ban it said could extend to the rest of the EU. But this could just be the start of tit-for-tat exchanges between Russia and the West. Darren Sinden is from Titan Investment. SOUNDBITE: Titan Investment Trader, Darren Sinden, saying (English): "Although Moscow obviously steers its own path, they will be wary of threatening to cut off gas supplies, or reducing gas supplies for instance, but they might hint at doing that as a response, and they will presumably make some sort of token gestures against targeted European and perhaps American businesses too." The sanctions are targeting Russia after Western countries accused it of helping arm separatist rebels in eastern Ukraine. That was where Malaysia Airlines flight MH17 was shot down last month. Russia's envoy to the EU was quoted saying the sanctions were not helping the situation there though. And latest indications are that fighting, if anything, is worsening. This is the aftermath of a shelling in Donetsk, while the government said that elsewhere rebels killed at least 10 Ukrainian paratroopers in an overnight ambush.