(Updates with sanctions and Russian aircraft, paragraphs 1-2,
* Separatists seize international mediators
* Lavrov says U.S. "distorting" Geneva agreement
* Russian aircraft entered Ukraine airspace, Pentagon says
* S&P cuts Russia's rating, central bank raises interest
By Thomas Grove and Arshad Mohammed
SLAVIANSK, Ukraine/WASHINGTON, April 25 The
United States and the European Union are expected on Monday to
impose new sanctions on Russian individuals, sources said on
Friday, as the Ukraine crisis escalated with armed pro-Russia
separatists seizing a bus carrying international mediators.
The Pentagon said Russian aircraft breached Ukraine's
airspace several times over the past 24 hours, but did not offer
more details. Pentagon spokesman Colonel Steve Warren called on
Russia to "take immediate steps to de-escalate the situation."
The separatist self-declared mayor of the east Ukraine city
of Slaviansk told Reuters the mediators were being held because
they were believed to have a spy amongst them from the
pro-Western government in Kiev.
"People who come here as observers bringing with them a real
spy: it's not appropriate," Vyacheslav Ponomaryov said in front
of a security service building occupied by separatists where the
Ukrainian government said the observers were being detained.
The fresh U.S. and EU sanctions come in response to Russia's
alleged efforts to destabilise eastern Ukraine, said sources
familiar with the matter, speaking on condition of anonymity.
The EU is expected to name 15 previously unidentified
individuals to be placed under sanctions and would focus on
those it thinks are responsible for the unrest in Ukraine, the
The United States is expected to impose sanctions on
entities and individuals, including "cronies" of Russian
President Vladimir Putin, they said.
The sources said the one thing that might prevent the EU and
the United States from moving ahead with the sanctions on Monday
would be a sudden reversal of what they say is Russian-sponsored
separatist movements in eastern Ukraine.
"You will find a European list much more connected to
actions on the ground, and an American list more focused on
cronies and entities," said one of the sources, adding that some
EU nations remain concerned about placing sanctions on Putin
German Defence Minister Ursula von der Leyen said 13
observers from the Organization for Security and Cooperation in
Europe (OSCE) had been seized, including three members of the
German armed forces, a German translator and a Danish national.
"It is critical that we use all diplomatic channels to free
this team immediately and unhurt," von der Leyen said, adding
that officials were trying to establish the captors' demands.
Russia denies allegations it is directing the separatists,
who have taken control of large parts of eastern Ukraine over
the past three weeks.
But the White House said U.S. President Barack Obama and
European allies agreed on Friday that Russia had escalated
tension in the region, where the rebels have declared an
independent "People's Republic of Donetsk".
Britain and Germany agreed further sanctions were in order,
building on targeted U.S. and European sanctions against Russian
and Ukrainian individuals following Russia's annexation of
"We are working with our international partners to make sure
that when we do it, we do it in an effective way," U.S. Treasury
Secretary Jack Lew said.
Putin has scoffed at the sanctions so far imposed, which
have been limited to travel bans and overseas assets freezes on
The standoff has led to heavy capital flight from Russia,
prompting credit rating agency Standard & Poor's to cut the
country's ratings on Friday. That forced the central bank to
raise its key interest rate to reverse a drop in the rouble.
Ukraine sent in troops to try to dislodge the separatists
for the first time on Thursday, killing up to five rebels around
Slaviansk in what it said was a response to the kidnapping and
torture of a politician found dead on Saturday.
Russia's foreign minister, Sergei Lavrov, accused
authorities in Kiev of waging "war on their own people".
"This is a bloody crime, and those who pushed the army to do
that will pay, I am sure, and will face justice," Lavrov said.
The Kremlin says it has the right to defend Russian speakers
anywhere if they are under threat and has deployed extra troops
on the border with Ukraine, which NATO says number up to 40,000.
They began military exercises on Thursday and Ukraine said
they had approached to within 1 km (0.6 mile) of its border and
that it would treat any incursion as an invasion.
Ukrainian special forces launched a second phase of their
operation on Friday by mounting a full blockade of Slaviansk,
the rebels' military stronghold, a presidential official said.
One of its military helicopters was hit by rocket fire and
exploded while on the ground at an airport near the city, the
Defence Ministry said.
Pro-Western leaders in Kiev, who took power in February
after Moscow-ally President Viktor Yanukovich fled following
mass protests against him, say they fear Russia will try to take
over eastern Ukraine.
Russian troops seized Ukraine's Crimean peninsula on the
Black Sea soon after Yanukovich left for Russia in February.
Moscow denies interfering in eastern Ukraine, as it did in
Crimea before admitting its forces had gone in.
The White House statement came after Obama pressed four
European leaders on the need for more robust action against
Russia. Europe is reluctant to impose tough sanctions due to its
reliance on Russian gas and trade ties with Moscow.
"The president noted that the United States is prepared to
impose targeted sanctions to respond to Russia's latest
actions," it said. "The leaders agreed to work closely together,
and through the G7 and European Union, to coordinate additional
steps to impose costs on Russia."
Britain agreed the current sanctions would need to be
extended given what it said was Russia's refusal to support an
international peace agreement that it signed up to last week
under which all sides agreed to work to disarm illegal groups.
German Chancellor Angela Merkel said the leaders would have
to react. "Because of the lack of progress we will have to
contemplate further sanctions," she said before the call.
France said sanctions had been discussed and the leaders had
called for a "speedy reaction" to the crisis from leading
industrial nations. Italy said the leaders had agreed on the
situation but gave no details.
"The leaders underscored that Russia could still choose a
peaceful resolution to the crisis, including by implementing the
Geneva accord," the White House statement said.
Lavrov said Moscow was committed to implementing the Geneva
agreement but accused Washington of distorting it with
"one-sided demands". However, Russia's Defence Ministry said it
was ready for "unbiased and constructive" talks with the United
States to stabilise the situation.
U.S. Secretary of State John Kerry said Russia was using
propaganda to hide what it was trying to do in eastern Ukraine -
destabilise the region and undermine next month's Ukrainian
presidential elections - and decried its "threatening movement"
of troops up to Ukraine's border.
Ukraine's Prime Minister Arseny Yatseniuk said Russia wanted
to start World War Three by occupying the country and creating a
conflict that would spread to the rest of Europe.
(Additional reporting by Gabriela Baczynska in Moscow, Roberta
Rampton in Washington, Maria Tsvetkova in Donetsk, Alexei
Anishchuk, Lidia Kelly and Oksana Kobzeva in Moscow, Alastair
Macdonald and Pavel Polityuk in Kiev, Alexandria Sage in Paris,
James Mackenzie in Rome and Erik Kirschbaum in Berlin; writing
by Will Waterman and Philippa Fletcher; Editing by Mark
Trevelyan and Mohammad Zargham)