Putin orders retaliatory measures against U.S., EU

Russian President Vladimir Putin has ordered his government to prepare retaliatory measures against the latest round of sanctions imposed by the United States and the European Union to coerce Russia to change its policies in Ukraine.

“The Russian government has already proposed a series of retaliatory measures against the so-called sanctions imposed by certain countries,” Putin said Tuesday while on an official visit to the city of Voronezh in southern Russia. “I think that in current conditions, with the goal of protecting the interests of domestic producers, we should certainly think about that.”

Putin was speaking after Dmitry Medvedev, the Russian prime minister, told transport officials in Moscow that the government would consider countermeasures against the EU for sanctioning Aeroflot, Russia’s national airline.

Aeroflot grounded its Dobrolet subsidiary on Monday after European leasing and insurance companies suspended cooperation with the low-cost carrier.

EU policy makers deemed that Dobrolet was facilitating Russia’s integration with Crimea by transporting holiday makers to the Black Sea peninsula, which Russia annexed from Ukraine in March. The U.S. and the EU stepped up sanctions against Russia last week in a bid to force the Kremlin to withdraw support for pro-Moscow separatist rebels in southeastern Ukraine.

Earlier penalties imposed after Russia annexed Crimea had mainly targeted individuals and companies believed to be close to Putin. However, the new, tougher measures struck at the heart of the Russian economy by aiming to cut off the financial, oil and defense industries from international capital markets.

Putin has repeatedly said that sanctions were counterproductive and would backfire on the U.S. and Europe. On Monday he went further, slamming the punitive measures as illegal.

“Political tools of economic pressure are unacceptable; they contradict all norms and rules,” he said.

At the same time he warned that countermeasures should be selected carefully “to support domestic producers and not harm domestic consumers.”

Russia was considering closing its airspace to European airlines on Europe to Asia routes to retaliate against the Aeroflot sanctions, Vedomosti, the Russian business daily, reported on Tuesday, citing several anonymous official sources.

If applied, the ban would affect Air France, British Airways and Lufthansa--as well as Aeroflot, which collects revenue from air carriers crossing Siberian airspace en route to Asia.

Western sanctions come at a difficult time for Russia, which was battling an economic contraction even before the Ukraine crisis. In a sign that the Kremlin was bracing for a financial crunch, Medvedev warned on Tuesday that sanctions might force the government to raise taxes next year.

“We have to analyze additional ways to mobilize income, including...an increase in the tax burden, although this measure should be used as a last resort,” he told a government meeting.

Political commentators have warned that the sanctions risk strengthening the hand of powerful, nationalistic individuals in Putin’s inner circle eager to roll back Western influence and investment in Russia.

Russia should see the sanctions as an opportunity to boost the self-sufficiency of the defense sector and other industries, Dmitry Rogozon, the Russian deputy prime minister, told a meeting of naval officials this week.

“We must at last focus on the development of our own industries and fully replace imports so as to maximize our independence at a time of unprecedented pressure on our country” he said.

Gorst is a special correspondent