* Putin orders food import curbs in muted retaliation
* Central bank warns bans will hurt inflation fight
* Finland says EU must share burden of retaliation
* Western bank still expects robust Russia profits
* Coca-Cola cuts TV commercials in Russia
By Sakari Suoninen and Dmitry Zhdannikov
ESPOO, Finland/MOSCOW, Aug 6 Finland warned on
Wednesday that Russian retaliation against EU sanctions could
push its economy into crisis, while President Vladimir Putin
ordered curbs on food imports from countries that join the
Western action over Ukraine.
Despite the deepening crisis, Putin held back from imposing
any broad ban or restrictions that might cause food shortages or
risk stoking inflation.
East-West relations, already at their worst since the Cold
War, soured yet further on Wednesday as NATO said Russia might
use the pretext of a humanitarian mission to invade eastern
Although rhetoric levels are rising, Putin's response to EU
sanctions targeting Russia's banking, energy and defence
industry remains relatively muted. On Wednesday, he signed a
decree banning or limiting imports of agricultural products from
countries that have imposed the sanctions.
Putin ordered his government to come up with a list of goods
to be banned for one year, the Kremlin said. However, with the
central bank warning that import restrictions could push up food
prices and general inflation, Putin said the list should not
hurt Russian consumers - who are fond of U.S. chicken pieces
known as "George Bush's leg".
Nevertheless, the prospect of tit-for-tat economic
restrictions has raised concern among smaller European Union
nations that have close trading ties to Russia. Finland, which
shares a long border with Russia, said it feared a repeat of the
turmoil suffered by most Western economies in 2008-09.
"This has the potential - and I stress potential - to become
Economic Crisis 2.0," Prime Minister Alexander Stubb told
reporters in the Finnish city of Espoo.
Neutral Finland traded heavily with its huge neighbour even
during the Cold War, and suffered badly when the Soviet Union
collapsed almost a quarter of a century ago. Today, Russia is
Finland's third largest export market, while Russian tourists
spend roughly 2 billion euros ($2.7 billion) a year in Finland.
Stubb said he expected Moscow to retaliate but defended the
sanctions, imposed after Russia annexed Crimea from Ukraine in
March and tightened after a Malaysian airliner was shot down
over territory in eastern Ukraine held by pro-Moscow rebels.
However, he made clear the burden of retaliation had to be
shared among EU members: "If sanctions hit Finland
disproportionately, we will seek aid from our EU partners."
SET UP WELL
So far, smaller or poorer countries have featured
prominently among those targeted by the Russian response.
Veterinary watchdog Rosselkhoznadzor said it was suspending
beef and cattle imports from Romania, citing an outbreak of mad
cow disease. Moscow has already imposed bans on Ukrainian juice
and dairy produce, Polish vegetables and Australian beef, saying
it might target Greek fruit and U.S. poultry.
The central bank warned that bans on importing such cheap
products could make it harder to control inflation, which fell
to an annual 7.5 percent in July, but remains well above the 6.5
percent increase seen in 2013.
Rosselkhoznadzor said Russia would look to other suppliers
to compensate for the bans. "We are talking about a significant
increase of meat and dairy imports from Brazil," said Alexei
Alekseenko, spokesman for the watchdog.
The sanctions have effectively frozen Russian banks out of
EU financial markets, and yet one Western bank active in Russia
said it expected to keep making solid profits there despite
losing some business.
Bank Austria, the central and eastern European arm of
Italian bank UniCredit, said its pretax profit in Russia rose 3
percent to 247 million euros in the first half of this year.
That was more than a quarter of its total pretax profit,
making Russia its most profitable market.
Bank Austria said it would be able to keep raising money
locally. "Given what we know now about sanctions, we assume that
in Russia we will continue to have a very significant profit
contributor. We feel we are set up well," Chief Executive
Willibald Cernko said.
Federico Ghizzoni, UniCredit's chief executive, also
expressed confidence. "The bank seems strong enough to go
through this storm," he said in Milan. "This is not to say that
we are not looking at the situation with concern, but there is
no systemic problem," he said, adding the bank estimated a hit
of up to 10-15 million euros in lost revenues.
In a research note, Berenberg analysts said UniCredit was
among the European banks most exposed to Russia - whose economy
is already teetering on the verge of recession.
While the direct effect of sanctions would be limited, it
said the indirect fallout could include weaker demand for
Russian debt, and funding restrictions and deteriorating asset
quality - meaning more Russian borrowers are likely to default
on their loans.
In a sign of the economic slowdown, soft drinks giant
Coca-Cola Co said it had taken advertisements off four
television channels there as a fall in second-quarter sales
prompted a rethink of its marketing plans.
Two of the channels named by the Russian business daily
Kommersant are owned by St Petersburg-based Bank Rossiya, which
is owned in turn by Yuri Kovalchuk, a close ally of Putin.
Kovalchuk was hit by U.S. sanctions in March and blacklisted
by the EU last month. However, a Coca-Cola spokeswoman said by
email that "there is no political motive in this decision".
(1 US dollar = 0.7487 euro)
(writing by David Stamp; additional reporting by Michael
Shields, Angelika Gruber, Maria Kiselyova, Silvia Aloisi and
Gianluca Semeraro; Editing by Kevin Liffey)