(Updates with Fabius in 10th paragraph. For more on the conflict in Ukraine, go to EXT2.)
April 14 (Bloomberg) -- European officials weighed expanding sanctions against Russia over Ukraine, where they say the government in Moscow is stoking deadly separatist unrest with the same methods it used to destabilize and annex Crimea.
European Union foreign ministers, meeting today in Luxembourg, said the bloc should be prepared to impose a third round of sanctions, including economic measures, as armed separatists in eastern Ukraine ignored a deadline to free official buildings they’ve occupied. Russian Foreign Minister Sergei Lavrov denied his nation is involved.
Mounting tensions in Ukraine’s east, where at least one serviceman was killed at the weekend, are overshadowing crisis talks with Russia, the U.S. and the EU planned for April 17. Russia and the U.S. traded barbs at an emergency meeting of the United Nations Security Council last night, blaming one another for the latest unrest.
“There do have to be consequences to a further and further escalation by Russia,” U.K. Foreign Secretary William Hague told reporters. “I will be arguing today that further sanctions have to be the response to Russia’s behavior.”
The yield on Ukraine’s Eurobond due 2023 jumped 38 basis points to 9.89 percent, the highest since March 24, at 4:01 p.m. in Kiev. The hryvnia slid for an eighth day, losing 3.5 percent to 13.15 per dollar, bringing this year’s loss to 37 percent. Russia’s ruble declined to a three-week low and the benchmark Micex stock index retreated 1.3 percent. European stocks fell for a third day while Brent crude oil advanced to a two-week high.
Treasury Secretary Jacob J. Lew said the U.S. is “fully prepared to impose additional significant sanctions on Russia as it continues to escalate the situation in Ukraine, including apparently through support to a concerted campaign by armed militants in eastern Ukraine.” Lew spoke in Washington as he signed a $1 billion loan guarantee for Ukraine.
Russian President Vladimir Putin is getting many requests from eastern Ukraine “to intervene in one way or another,” his spokesman, Dmitry Peskov, told reporters in Moscow today.
Two unarmed Russian SU-24 Fencer aircraft flew as many as 12 passes over 90 minutes near the USS Donald Cook in the Black Sea on April 12, Colonel Steve Warren, a Pentagon spokesman, told reporters today.
The destroyer was never in any danger, according to Warren, who called the flights acts “of unprofessionalism” by the Russians. The ship, equipped with the advanced Aegis air-defense system, wasn’t engaging in exercises at the time, he said.
EU leaders may meet next week to decide on new sanctions against Russia, French Foreign Minister Laurent Fabius said in Luxembourg.
The EU has blacklisted 51 Russian and Ukrainian political and military figures and is looking at how to inflict stiffer punishments without harming Europe’s still struggling economy, such as by provoking Russia to cut off gas and oil deliveries. It added four more Ukrainians to the list today and will release their names later, according to a website statement.
Wider sanctions are unlikely to be announced today, the ministers said. EU governments are waiting for the European Commission, the bloc’s executive arm, to make proposals later this week.
Lithuanian Foreign Minister Linas Linkevicius urged striking at Russia’s banking and finance system, tactics used to isolate Iran over its nuclear program. In the Ukraine crisis, the U.S. has already ventured onto that terrain by sanctioning Bank Rossiya.
Linkevicius voiced frustration with the consensus-based decision-making that condemns the 28-nation EU to move at the pace of its slowest member. “We shouldn’t focus too much on washing dishes when the house is on fire,” he said.
Countries further away from the EU’s eastern borders are in less of a hurry. Greek Finance Minister Evangelos Venizelos called for diplomacy and Luxembourg Foreign Minister Jean Asselborn said Russia has sanctioned itself, citing the ruble’s drop and jitters among outside investors.
In the eastern Ukrainian town of Slovyansk, about 240 kilometers (150 miles) from the Russian frontier, protests escalated at the weekend. Camouflaged gunmen fired on government troops in an anti-terror operation, killing one and wounding five, the Ukrainian government said.
There were no reports of Ukrainian forces moving on the buildings after the passage of a 9 a.m. deadline set by acting President Oleksandr Turchynov.
Pro-Russian protesters also occupied police and local- government buildings in Horlivka, Kramatorsk, Donetsk and Mariupol, the Ukrainian Interior Ministry said on its website.
Turchynov sought to ease tensions by raising the possibility of holding a national referendum on the structure of the state together with presidential elections set for May 25, Interfax reported today. He said he’s sure people will opt for a united, independent Ukraine, according to the news service.
EU foreign-policy chief Catherine Ashton said today’s aim is to prepare for an April 17 meeting in Geneva that she will attend with diplomats from Ukraine, Russia and the U.S.
Ashton said the point of the Geneva meeting -- shadowed by speculation that Lavrov may not show up -- is “to begin the conversation about how do we de-escalate the situation.”
Ukraine would be open to a joint peacekeeping operation involving the UN, Turchynov said today after meeting UN Secretary General Ban Ki-Moon.
Several EU ministers said today that Russia is following the same script with eastern Ukraine as it did with Crimea, by infiltrating agitators to stir up pro-Russian sentiment that serves as a pretext for seizing territory.
“It looks very, very similar to what happened previously in the Crimea,” Dutch Foreign Minister Frans Timmermans said. “If it looks like a horse, if it walks like a horse, it’s usually a horse and not a zebra.”
--With assistance from Daria Marchak, Kateryna Choursina and Daryna Krasnolutska in Kiev, Sangwon Yoon in United Nations, Ilya Arkhipov and Stepan Kravchenko in Moscow and Kasia Klimasinska and Tony Capaccio in Washington.