Brussels, 19/03/2014 (Agence Europe) - The European summit on Thursday 20 and Friday 21 March will focus on the crisis in Ukraine, admitted several European diplomats on Wednesday 19 March.
Over dinner on Thursday, the EU heads of state will discuss the situation now that Crimea has been taken by Russia, and may decide on further sanctions. Several sources comment, however, that the EU will approach the question cautiously. A diplomat of one member state said that the right solution is one that allows Europe to remain united. Another diplomat asked whether Crimea's annexation would be a red line for phase three of the action plan laid down by Europe's leaders on 6 March, in other words for economic sanctions (see EUROPE 11033)?
Several sources say that, rather than moving to phase three, Europe's leaders may decide to simply add to the people on the EU's visa-ban and asset-freezing list. Members of the Russian government close to the President Putin and media representatives might be added, for example. The EU-Russia summit in Sochi in June is likely to be formally cancelled.
The Baltic States and Poland are reported to favour entering phase three, but other countries, Luxembourg and Cyprus, for example, are far more reluctant. At the 17 March Foreign Affairs Council, Cypriot Foreign Minister Ioannis Kasoulides said that he did not oppose measures that will not penalise Europe or the European economy. He said that, in the event of measures of this type, Nicosia would request compensatory measures. A diplomat from another member state said there would have to be more detailed assessment by the European institutions of the potential impact of such measures in terms of the economy, finance and energy, and the reaction they could spark in Russia. He added further steps were possible that were political and connected with what the EU does with Russia - rather than economic, trade, financial or energy-related measures.
Another diplomat said that Putin expects Europe to decide on economic sanctions that will cause Europe to split, because there are differences over the definition of phase three in the 6 March conclusions document. What does “any other measure by Russia that could destabilise the situation in Ukraine” mean in practice? What is meant by “a large number of economic domains”? A European source says that the EU28 may decide to give details of what is meant by these phrases, and may mandate the European Commission to prepare for phase three (it has already started doing so unofficially).
The EU heads of state will also discuss aid for Ukraine. Before entering talks on Friday 21 March, the leaders will sign the political chapters of the EU-Ukraine association agreement with the Ukrainian prime minister, Arseniy Yatsenyuk.
Ukraine to get €1 billion more in aid.
On Wednesday 19 March, the European Commission decided to offer Ukraine new macrofinancial aid (MFA) of €1 billion, on top of the €610 million already agreed upon as part of a global aid plan currently being negotiated between Ukraine and the International Monetary Fund.
Euro Commissioner Olli Rehn said the loan was to help Ukraine deal with its immediate financial needs and support economic reform in the country, and is subject to certain conditions. The Ukrainian government will be required to introduce structural reforms to improve management of public finance, to consolidate the social safety net and fight corruption. Rehn admitted that the question of setting energy prices would be raised in the upcoming talks with the Ukrainian government. He said fuel prices were heavily subsidised and a heavy burden on public finance in Ukraine, and recommended that a change in energy tariffs be included in special measures for vulnerable sections of the population in order to alleviate the social impact of the adjustment.
Earlier this month, the Commission announced an aid package from the EU of €11 billion, including two MFA agreements totalling €1.6 billion (see EUROPE 11032). Last week, it offered temporary tariff liberalisation measures to boost Ukraine's exports to the EU, saving the country half a billion euro in customs duty a year (see EUROPE 11036). (CG and AN, MB, MD, EH)