Swedish Foreign Minister Carl Bildt, Polish Foreign Minister Radoslaw Sikorski and EU foreign policy chief Catherine Ashton at a recent EU summit. European leaders will mull hard-hitting sanctions against Russia's economy when they meet in Brussels on July 29.
As Europe's leaders prepare to meet in Brussels on July 29, signs are emerging that the European Union is finally moving towards the consensus needed for tougher measures against Russian President Vladimir Putin to punish his war against Ukraine.
The July 17 downing of the Malaysia Airlines passenger jet over territory controlled by Russian-backed separatists, killing all 298 people on board, appears to have stiffened the resolve of politicicians and also prompted reluctant business groups to back further measures.
A view is emerging that Russia, believed to have supplied the surface-to-air missile that shot down flight MH17, must be directly challenged to persuade Putin to stop backing the Russian-led mercenaries in eastern Ukraine.
Thus far the EU has restricted punitive action against Moscow to asset freezes and visa bans targeting members of Putin’s inner circle. But according to a draft EU statement dated July 25, acquired by several news sources, the 28-member bloc is considering introducing so-called “phase three” sanctions targeting entire sectors of the Russian economy.
The proposed measures prevent exports of “key equipment and technology for the oil industry,” although the EU is not expected to fully halt trade with Russia’s gas industry for fear of provoking retaliation against countries dependent on Russian gas. The measures also deprive Europeans of the ability to “directly or indirectly transact in, provide financing or investment services for, or otherwise deal in” long-term debt or stock newly issued by state-owned Russian banks, the Financial Times reports.
The measures are also expected to include a blanket arms embargo as well as a ban on “dual-use” exports if the suppliers “have grounds for suspecting” items may be for military use.
Shifting mood in Europe
In recent days, highly-placed officials from key EU member nations have made statements in support of further action against Moscow. The campaign is being spearheaded by the United Kingdom and the Netherlands, whose nationals comprised the majority of those aboard the doomed Malaysia Airlines plane.
Opposition to further sanctions in the United Kingdom has predominantly come from London’s financial sector. Freezing the assets of Russia’s business elites and moving to restrict their access to Europe’s financial capital would impact growth prospects in the UK, and business groups within the country have been lobbying Prime Minister David Cameron for months to oppose such measures.
Nevertheless, the mood in the UK appears to be shifting in line with the international community’s realization that the MH17 disaster and Russia's continued aggression needs to be stopped. British Trade Minister Lord Livingston told the Daily Mail on July 27 that that the UK’s diplomatic credibility depends on the city bearing the brunt of further sanctions.
"I've heard some people say 'oh, the city of London isn't going to take the pain' but that's not true. We've got to make sure that the whole of Europe thinks that the UK is absolutely willing to take its share of the pain and do the right thing," he told the newspaper.
Of equal significance are changing perceptions among the business elites in Germany, a country for months split between factions variously disposed towards maintaining trade ties with Moscow. Europe’s biggest economy constitutes around a third of the EU’s total trade with Russia, but the first four months of 2014 have seen a 14 percent fall in Germany’s exports to its large eastern neighbor.
German business groups have warned of a major loss of jobs in the country should further sanctions against Moscow be imposed, although recent developments seem to have provoked a reassessment of the risks involved.
Ulrich Grillo, head of the Federation of German Industry, acknowledged the effect that broader sanctions would have on economic prospects in the EU and Germany, but argued that the 28-member bloc must take the hit if it wants to ensure peace on the continent.
"Tougher sanctions will bring significantly more noticeable repercussions. However, the economic damage suffered by Germany and other EU countries will be more than cancelled out if we succeed in enforcing international law in Europe and a legal framework more generally," Grillo told German business daily Handelsblatt.
Even Der Spiegel, Germany’s most renowned publication internationally, appears to be retreating from its usually reserved stance in support of broader sectoral sanctions against the Putin regime. The cover of this week’s edition displays the faces of the victims of flight MH17 with the words “Stop Putin now!” in large red lettering. Furthermore, the publication’s own survey revealed that most Germans now support the implementation of tougher punitive measures against the Kremlin, even if this leads to a large loss of jobs in the country.
Against this backdrop, France continues to face a backlash over its planned $1.6 billion sale of Mistral warships to Russia, a deal the administration of French President Francois Hollande has staunchly defended. The arms embargo included in the leaked EU document is not expected to preclude existing defense contracts from going ahead, paving the way for France to execute the sale.
In a statement last week, Hollande confirmed the sale of the first Mistral to Russia will go ahead in October. However, in an apparent concession to EU diplomats critical of the deal, he revealed that the sale of the second warship will be placed on hold pending further developments in Ukraine.
Responding to the EU’s accusations, Paris has in turn accused the United Kingdom of hypocrisy for lambasting its defense contracts with the Kremlin while at the same time allowing the City to continue operating as a hub for Russian capital. Nonetheless, having received the green light for its deal with Moscow, France may well fall in line with most other EU states and give its approval to fresh sanctions on July 29.
Moscow ridicules US ‘proof’ of Russian rocket strikes against Ukraine
The developments come as the U.S. releases satellite images which Washington claims are further evidence of Russia’s hand in destabilising Ukraine’s east.
The photos, contained within a four-page document published online on July 28 and attributed to the U.S. State Department, purport to show blast marks caused by rocket launches from Russian territory and craters on the Ukrainian side of the border. They were shared on Twitter by America’s ambassador to Ukraine Geoff Pyatt following their release.
Russian state-owned channel RT has questioned the authenticity of the images, citing U.S. economist and former government official Paul Craig Roberts as saying that information of such importance would not be released by the State Department in such a way. It also reported on Russian border guards’ claims that at least 45 mortar shells were fired by Ukraine’s army at targets located in Russia’s Rostov region, destroying houses and forcing civilians to flee.
Responding to the likelihood of further sanctions against the Kremlin, Russian Foreign Minister Sergey Lavrov said on July 28 that proposed measures by the EU would fail in their goal to cripple Russia’s economy and only make it more independent.
"(Sanctions) simply cannot achieve (their aim) ... I assure you, we will overcome any difficulties that may arise in certain areas of the economy, and maybe we will become more independent and more confident in our own strength," Lavrov told a news conference, according to Reuters.
Russia toughened its own economic measures against Ukraine on July 28 by banning imports of milk and dairy products from its western neighbor, Interfax reports.
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