Brussels, 30/07/2014 (Agence Europe) - On Tuesday 29 July, European Council President Herman Van Rompuy and European Commission President José Manuel Barroso underlined that the economic sanctions decided upon the same day by the ambassadors of the European Union member states were designed as “a strong warning” to Russia.
“The package of new restrictive measures agreed (…) by the European Union constitutes a powerful signal to the leaders of the Russian Federation: destabilising Ukraine, or any other Eastern European neighbouring state, will bring heavy costs to its economy”, Van Rompuy and Barroso said, adding that Russia will find itself “increasingly isolated by its own actions”.
The EU “remains ready to reverse its decisions and reengage with Russia when it starts contributing actively and without ambiguities to finding a solution to the Ukrainian crisis”, Van Rompuy and Barroso stated. They recalled that, since the beginning of the Ukrainian crisis, the EU has been calling on the Russian leadership to work towards a peaceful resolution but this call “has been, in practice, left unheeded”.
To justify the sanctions, Van Rompuy and Barroso stated that, “when the violence created (…) leads to the killing of almost 300 innocent civilians in their flight from the Netherlands to Malaysia, the situation requires urgent and determined response”. “The European Union will fulfil its obligations to protect and ensure the security of its citizens.”
Sanctions should be in force on 1 August. On 29 July, the ambassadors of the EU also agreed on economic sanctions targeting Russia in connection with Russia's actions to destabilise the situation in Eastern Ukraine. The measures are due to be formally adopted by written procedure by the Council on Thursday 31 July, and published in the Official Journal later that day. They are due to enter into force on 1 August. The sanctions will last for 12 months, with a clause for review after three months. An expert committee will be created in the Council (with the EEAS, European Commission and member states) to monitor the impact on the EU and on Russia, and to analyse the possible Russian counter-measures and measures taken by other countries such as the USA, said a Commission source.
In order to limit Russia's access to EU capital markets, EU nationals and companies will no longer be able to buy or sell new bonds, equity or similar financial instruments with a maturity exceeding 90 days, issued by major state-owned Russian banks, development banks, their subsidiaries and those acting on their behalf. Services linked to the issuing of these financial instruments, for example brokering, will also be prohibited. “The objective is to restrict the possibility for Russian banks to have access to European finance or to be present on European stock exchanges”, said a European source. Loans and syndicated loans are nevertheless not included in these new sanctions, nor are corporate bonds or the subsidiaries of sanctioned Russian banks that operate in the EU. In 2013, 47% of bonds from Russian state-owned banks were issued in the EU (€7.5 billion).
Europeans also agreed on an embargo on the import and export of weapons and related material from and into Russia. This embargo covers all the elements in the common list of EU military equipment. “Contracts that have already been signed and imports and exports of spare parts, for capabilities linked to civil protection” are not concerned, said a European source. In 2013, the export of arms from Russia to the EU stood at €3.2 billion, and that from the EU to Russia at €300 million. An agreement to ban the export of dual-use goods and technology for military purposes in Russia or intended for military end-users will also be set up, and all the items on the EU list of dual-use goods are included.
Lastly, the export to Russia of certain energy-related equipment and technology will be subject to prior authorisation of the competent member state authorities. “Export licences will be denied if products are destined for deep water oil exploration and production, Arctic oil exploration or production and shale oil projects in Russia”, the Council states in a press release, adding that the measures will apply to new contracts. “The EU wants to target strategic projects, which should not have an immediate impact on Russia's oil production capacity or export to the EU, nor on the EU's current exports to Russia in the area of technology”, said a source. The source stated that the economic value of these restrictions was estimated at €150 million per year.
Sanctions against a further eight people and three entities were also officially adopted by written procedure by the Council on Wednesday 30 July, and were due to be published that evening in the Official Journal.
Sanctions inevitable according to Merkel. Germany's Chancellor Angela Merkel believed that the decision on the sanctions was “inevitable”. “The EU sanctions can be reviewed, but additional measures are also possible”, she said. She called on Russia to pave the way for de-escalation and cooperation in the conflict in Ukraine. For the UK, the package of sanctions shows Russia that there will be serious costs for its actions aiming to destabilise Ukraine. The UK's Foreign Secretary Philip Hammond said that the world is united in its desire to see Russia cooperate and stop supplying arms to the separatists. Lithuania's President Dalia Grybauskaité hailed the sanctions, regretting, however, that there was “nothing to stop” the sale of the French Mistral warships to Russia.
The USA also announced new measures against Russia, putting three Russian banks (VTB, Bank of Moscow and the Russian Agricultural Bank) on its black list and taking out sanctions on the united shipbuilding corporation - which builds oil tankers and submarines. (CG with JK)