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Russia called new US sanctions "destructive and short-sighted" on Wednesday and said they would only aggravate ties between Russia and the United States, already at their lowest point since the end of the Cold War over the Ukraine crisis.
"Such decisions by Washington can bring nothing but further aggravation of U.S.-Russia relations and create an utterly unfavourable environment in international affairs, where the cooperation between our states often plays a decisive role," Russia's Foreign Ministry said in a statement.
"The de-facto losses from this destructive and short-sighted policy will be quite tangible for Washington."
Sanctions imposed on Russia are having an affect on the economy according to Philip Hammond, the Foreign Secretary.
He said Russia's predicted economic growth for this year had gone from 2.5 per cent before sanctions to "roughly zero".
"It is having a cost on Russia it is having a disproportionate cost on the group of people that supports and sustains the Kremlin leadership," Mr Hammond said.
"I hope they will be urging a more considered response by the Russian leadership."
He also said the Government was due to announce a new set of sanctions against Vladimir Putin's government later today.
US President Barracks Obama said a new round of sanctions will continue to ratchet up the pressure on Russia.
The US leader said existing sanctions have already made the Russian economy even weaker.
He added: "If Russia continues on this current path, the costs on Russia will continue to grow."
European Union sanctions against Russia were meant as a "strong warning" that Russia's actions in Ukraine, according to Europe's top two officials.
In a joint statement the president of the European Commission, Jose Manuel Barroso, and European Council President Herman Van Rompuy said: "The European Union will fulfill its obligations to protect and ensure the security of its citizens. And the European Union will stand by its neighbours and partners."
The measures will shut major state-owned Russian banks out of European capital markets and target the defence sector and sensitive technologies, including oil. But they will exclude the vital gas sector, on which Europe is heavily dependent.
Barroso and Van Rompuy also warned that they would bring "heavy costs" to Russia's economy.
Apart from agreeing on the economic measures, ambassadors also signed off on a new list of Putin's associates and companies that will face asset freezes and visa bans under previous measures.
Eight more officials including four members of the Russian leader's inner circle, are also expected to be added the current list of 87.
The sanctions will initially last a year but will be reviewed after three months on Oct. 31 to determine their impact on Moscow's behaviour, diplomats said
The EU does more than 10 times as much trade with Russia as the United States.
The US expanded the list Russian businesses to be subjected to sanctions because Moscow's support for separatists in Eastern Ukraine, the US Treasury Department said.
Almost all the largest banks with state ownership of over 50 percent were affected, including the Bank of Moscow and the Russian Agriculture Bank.
The sanctions limits the dealings US citizens and companies can have with them.
Sanctions have also been imposed on a shipbuilding company based in St. Petersburg. Any assets held in the US have been frozen and American companies have been prohibited from dealing with them.
European Union sanctions will send a "very tough message" to Russia, according to Prime Minister David Cameron.
He said: "The sanctions really relate to Vladimir Putin's and Russia's behaviour, and we want to make it absolutely clear that Russia's behaviour in destabilising another country - Ukraine - is unacceptable."
He added: "It was very clear in my conference call with President Obama, President Hollande, Chancellor Merkel and prime minister Renzi yesterday that we are united in sending that very tough message. It's a message that will be backed by tough action."
The measures will shut state-owned Russian banks out of European capital markets and target the defense sector and sensitive technologies, including oil.
However the the gas sector, on which Europe is heavily dependent, is not expected to be included when the sanctions which are likely to be announced tomorrow.
Former foreign secretary Sir Malcolm Rifkind has called for tougher sanctions to ensure Russia changes policy in eastern Ukraine, describing previous measures against Vladimir Putin "pretty useless".
"When you get into the situation of preventing them having access to financial markets, preventing high quality technology exports to their energy industry, that goes to the very heart of the Russian economy," he told BBC Radio 4's Today programme.
Sir Malcolm said world leaders must make clear to Mr Putin that he needs to leave the Ukrainians to "resolve their own problem", by ceasing to provide military equipment and other support to separatist rebels.
However, he described Nick Clegg's call for Russia to lose hosting rights to the 2018 World Cup as "pretty amateur", adding: "A heck of a lot is going to happen between now and then."
Russia's says a UN human rights report criticising pro-Russian separatists in eastern Ukraine was "hypocritical".
The paper on fighting in the region argued that "a reign of fear and terror" had been inflicted on the people by armed militia backed by Russia.
It suggested rebels were using torture and detention to "exercise their power over the population in raw and brutal ways".
Russia's Foreign Ministry described the report as "unobjective and even hypocritical", adding that it failed to mention the detentions of Russian journalists in eastern Ukraine and the reported use of heavy rockets by the Ukrainian army against civilians.
Oil giant BP has warned that further international sanctions on Russia could harm the company's profits.
The UK business owns a 19.75% stake in Russian oil firm Rosneft, which is the subject of sanctions preventing it from using US financial institutions for new loans over a period longer than 90 days.
In its second-quarter results, BP said further international sanctions on Rosneft or on Russia could have a "material adverse impact" on its investment in Rosneft, its business in Russia and its own financial position.
Profits for the quarter to June 30 were $3.18 billion (£1.87 billion), up by a third on the same period a year earlier but down 8% on the previous quarter.
The investment in Rosneft, which is Russia's biggest oil producer, was a factor in the improved performance by BP as profits from the relationship nearly doubled to just over $1 billion (£589 million) in the second quarter.
In another sign of deteriorating relations between the United States and Russia, the US government said that Moscow had violated the Intermediate Range Nuclear Forces treaty, and urged immediate bilateral talks on the issue.
– White House Statement
This is a very serious matter which we have attempted to address with Russia for some time now.
The United States will, of course, consult with allies on this matter to take into account the impact of this Russian violation on our collective security if Russia does not return to compliance.