EU targets Russian oil, banks as Moscow's ally Belarus stages army drills

By Joseph Campbell and Alessandra Prentice

ZAPORIZHZHIA, Ukraine (Reuters) -The EU proposed its toughest sanctions yet against Russia on Wednesday, including a phased oil embargo, as Ukraine came under further heavy Russian bombardment and nervously monitored large-scale army drills in neighbouring Belarus, a close Moscow ally.

Nearly 10 weeks into a war that has killed thousands, uprooted millions and flattened cities and towns in eastern and southern Ukraine, Russia also stepped up attacks on targets in western Ukraine, partly to disrupt Western arms deliveries.

A new convoy of buses began evacuating more civilians from the devastated southeastern port city of Mariupol, which has seen the heaviest fighting of the war so far and where Moscow said remaining Ukrainian forces remained tightly blockaded.

Piling pressure on Russia's already battered $1.8 trillion economy, the European Commission proposed phasing out supplies of Russian crude oil within six months and refined products by the end of 2022. The price of Brent crude jumped 3% to more than $108 a barrel after the news.

The plan, if agreed by EU governments, would be a watershed for the world's largest trading bloc, which remains dependent on Russian energy and must find alternative supplies. Hungary and Slovakia want to be exempted from the ban for now, sources said.

"(President Vladimir) Putin must pay a price, a high price, for his brutal aggression," Commission chief Ursula von der Leyen told the European Parliament in Strasbourg, to applause from lawmakers.

She also announced sanctions targeting Russia's largest bank Sberbank, two other lenders, three state broadcasters and army officers and other individuals accused of war crimes.

The EU has yet to target Russian natural gas, used to heat homes and generate electricity across the bloc.

Putin raised the economic stakes further for Kyiv's Western backers on Tuesday by announcing plans to block exports of vital raw materials.

'WE ARE READY'

On the war front, Russia's Defence Minister Sergei Shoigu said his military would consider NATO transport carrying weapons in Ukraine, which is not a member of the alliance, as targets to be destroyed, RIA news agency reported. NATO says individual member states are sending military supplies but not troops.

His comments came after the ministry said it had disabled six railway stations in Ukraine used to supply Ukrainian forces with Western-made arms in the country's east. Reuters could not verify the claim and there was no immediate reaction from Kyiv.

The ministry also said it had hit 40 Ukrainian military targets, including four depots storing ammunition and artillery weapons.

Announcing the surprise military drills, Belarus's defence ministry said they posed no threat to its neighbours, but Ukraine's border service said it could not exclude the possibility that Belarusian forces might join Russia's assault.

"Therefore, we are ready," said spokesman Andriy Demchenko.

Some Russian forces entered Ukraine via Belarus when the invasion began on Feb. 24 but Belarusian troops have not so far been involved in what Moscow calls a "special military operation" to disarm Ukraine and defend it from fascists.

Kyiv and its Western backers say the fascism claim is an absurd pretext for Moscow to wage an unprovoked war of aggression that has driven five million Ukrainians to flee abroad.

The convoy leaving Mariupol, organised by the United Nations and the International Committee of the Red Cross, was heading for the Ukrainian-controlled city of Zaporizhzhia, Donetsk Governor Pavlo Kyrylenko said. It was not expected to arrive on Wednesday.

He did not say how many buses were in the convoy or whether any more civilians had been evacuated from the vast Azovstal steel works, where the city's last defenders are holding out against Russian forces that have occupied Mariupol.

The first evacuees from Azovstal arrived by bus in Zaporizhzhia on Tuesday after cowering for weeks in bunkers beneath the sprawling Soviet-era steel works.

"We had said goodbye to life. We didn't think anyone knew we were there," said Valentina Sytnykova, 70, who said she sheltered in the plant for two months with her son and 10-year-old granddaughter.

Ukraine's general staff said the Russian assault on Azovstal was continuing.

Russia now controls Mariupol, once a city of 400,000 but now largely reduced to smoking rubble after weeks of siege and shelling. The city is key to Moscow's efforts to cut Ukraine off from the Black Sea - vital for its grain and metals exports - and connect Russian-controlled territory in the south and east.

'WE ARE NOT AFRAID'

Moscow has deployed 22 battalion tactical groups near the eastern Ukrainian town of Izium in a possible drive to capture the cities of Kramatorsk and Severodonetsk in Donbas, British intelligence said. Reuters could not immediately verify the report.

The cities are in the eastern Donbas region - Russia's main target. Russian forces turned their heaviest firepower on Ukraine's east and south after failing to take Kyiv, the capital, in the opening weeks of the war.

But the mayor of Lviv in western Ukraine said Russian missile strikes late on Tuesday had damaged electricity and water networks in his city near the Polish border, across which flow Western arms supplies for Ukraine's military.

The governor of the eastern Luhansk region, Serhiy Haidai, said two civilians had been killed and two wounded in the past 24 hours, adding that Russian forces had shelled residential areas 34 times. Russia denies targeting civilians.

"There are no safe cities in Luhansk region," he said on the Telegram messaging service.

Ukraine remains defiant despite the unrelenting assault.

"Russia struggles to advance and suffers terrible losses. Thus the desperate missile terror across Ukraine. But we are not afraid and the world should not be afraid either," Ukrainian Foreign Minister Dmytro Kuleba said on Twitter (NYSE:TWTR).

"More sanctions on Russia. More heavy weapons for Ukraine. Russia's missile terrorism must be punished."