By Jan Strupczewski
BRUSSELS (Reuters) - The European Union may ban transactions with financial institutions in Crimea as part of its response to the annexation of the peninsula by Russia last month, an EU document obtained by Reuters showed.
EU leaders consider the takeover of Ukraine's Crimea by Moscow as illegal and have asked the EU executive arm, the European Commission, to propose economic, trade and financial restrictions on Crimea for rapid implementation.
These proposals are separate from an EU discussion on stepped-up sanctions against Russia if Moscow does not help deescalate tensions in eastern Ukraine between pro-Russian separatists and the government in Kiev.
"Solutions need to be found that at the same time support the territorial integrity of Ukraine, do not recognize the illegal annexation of Crimea, defend European interests in this region and do not penalize the Crimean people," the Commission said in a document prepared for EU governments.
"As a possible measure to discourage/penalize financial institutions located in Crimea from cooperating with the annexation policy it could be considered to restrict capital ... and prohibit EU entities/persons from carrying out transactions with them, i.e. restrict capital movements between the EU and those Crimean banks/operators," the Commission said.
"The same could hold for prohibiting investments by Crimean investors (companies located or registered in Crimea) into the EU and by EU investors into Crimean entities," it said.
The Commission proposals are still under review and a decision whether to follow them is likely to be taken by EU foreign ministers, whose next meeting is on May 12.
(Editing by Mark Trevelyan)