Russia hints at flight ban in response to new sanctions

Russia signalled on Monday it might ban Western airlines from flying over its territory as part of an "asymmetrical" response to new European Union sanctions over the Ukraine crisis.

Blaming the West for damaging the Russian economy by triggering "stupid" sanctions, Prime Minister Dmitry Medvedev said Moscow would press on with measures to reduce reliance on imports, starting with increasing output of domestic aircraft.

Medvedev suggested Russia should have hit back harder over the action by the United States and European Union to punish Moscow for its role in Ukraine, saying it had been too patient in the worst confrontation with the West since the Cold War.

"If there are sanctions related to the energy sector, or further restrictions on Russia's financial sector, we will have to respond asymmetrically," he told Russian daily Vedomosti, adding the airlines of "friendly countries" were allowed to fly over Russia.

"If Western carriers have to bypass our airspace, this could drive many struggling airlines into bankruptcy. This is not the way to go. We just hope our partners realise this at some point," he said in the interview published on Monday.

After suggesting it would hold off imposing new sanctions to give Moscow time to show it was resolving the Ukraine conflict, the European Union said on Monday it would press ahead with implementing the new measures later in the day. 

An EU diplomat said Russia's top oil producers and pipeline operators Rosneft, Transneft and Gazprom Neft were on its list of state-owned firms that would not be allowed to raise capital or borrow on European markets. 

A shaky ceasefire agreed on Friday in Ukraine has done little to convince some Western countries that Russia is committed to resolving the conflict in the country's east which has killed more than 3,000 people.

Shelling resumed near the port of Mariupol on the Sea of Azov on Saturday only hours after Russian President Vladimir Putin and Ukrainian leader Petro Poroshenko agreed in a phone call that the truce was holding. The ceasefire was largely holding on Monday despite sporadic violations. 

'We weren't the ones who started it'

Medvedev, who was once seen as the liberally-minded foil to Putin but now increasingly delivers harsh messages, said leaders in Ukraine should seize on Russian proposals for a peace plan which would leave separatists in control of large areas of territory in eastern Ukraine.

"Now comes the delicate work of achieving a durable peace," he said. "I hope that these efforts will succeed."

The sanctions, he said, had done little to bring "calm in Ukraine."

"They are wide of the mark, as the vast majority of political leaders recognize. Unfortunately, we are seeing the inertia of a certain way of thinking and the temptation to use force in international relations," he said.

He acknowledged Russia's economy had hit problems, and that growth would reach half a percent this year "or perhaps slightly more." But sanctions had spurred Russian efforts to become more self-sufficient, including in aircraft production, he said.

Russia "must of course continue on the course of increasing the number of aircraft that are produced in Russia and aircraft parts," RIA news agency quoted him as saying.

Deputy Prime Minister Dmitry Rogozin said Russia and China planned to sign an agreement in October on joint-production of a long-haul, wide-body aircraft and that Russia planned to double output of the Sukhoi Superjet.

He gave no other details of the planned venture with Beijing but Russia has been stepping up cooperation with Asia in many areas to reduce dependence on Europe or the United States as the sanctions bite.

Russia's ban on food imports from the EU, United States, Canada and Norway would also help Russia, Medvedev said, by spurring domestic agriculture by forcing consumers to pay attention to Russian produce and for farmers to modernize.

"We weren't the ones who started it. In fact, we were too patient. There was an urge to retaliate sooner, but it was the president's position not to respond," he said.

"But after several waves of sanctions, a decision had to be taken. Importantly, this political decision is supported by the vast majority of Russians."

(Additional reporting by Lidia Kelly, Editing by Timothy Heritage and Andrew Heavens)