Western sanctions may lead to new Cold War, warns Russia

Russia on Thursday warned of grave international financial consequences from a new, stronger round of US sanctions, with Prime Minister Dmitry Medvedev calling them sanctions ''evil''.

The comments came even as a Malaysian Airlines international flight over Ukraine was shot down, killing all 278 on board, and further exacerbating the tensions between Russia and the West.

Medvedev warned that Moscow plans to bolster spending on defence and security in response.

Russia's stock market dropped sharply on Thursday after the US decision to target major Russian banks, energy companies and defence firms with tough restrictions on their finances (See: Sanctions on Russia would boomerang, Putin warns US).

''We may go back to the 1980s in our relations with the states that are declaring these sanctions,'' Medvedev said at a meeting of cabinet ministers broadcast on Russian state television. ''This is sad.''

The measures come at a critical juncture in negotiations with Iran over its nuclear programme - talks in which Russia's cooperation has been vital for the United States to achieve its aim of restricting Iran's ability to build a nuclear weapon.

The Russian foreign ministry warned of unspecified consequences for joint efforts on issues that range far beyond the Ukraine conflict, raising concerns that negotiations with Iran could be affected.

Russia's foreign minister Sergei Lavrov skipped Iran talks this weekend in Vienna, dashing hopes that a deal would be reached by Sunday.

The sanctions are ''a primitive attempt to avenge events in Ukraine that are not developing according to Washington's script,'' the Russian foreign ministry said in a statement. ''A serious loser will be the business community of the USA, which will have to pay the White House's bill.''