EU Completes Plan to Broaden Economic Sanctions Against Russia

By Jonathan Stearns

European Union diplomats approved the EU’s broadest sanctions yet against Russia, highlighting doubts that a cease-fire in Ukraine will hold.
Hours after the Ukrainian government agreed with pro-Russian separatists to stop fighting as of 6 p.m. local time yesterday, EU ambassadors in Brussels drew up the 28-nation bloc’s second package of economic penalties against Russia over its encroachment in Ukraine. Provisions include barring some Russian state-owned defense and energy companies from raising capital in the EU, according to a European official who spoke on the
usual condition of anonymity.
The extra penalties still need the formal endorsement of EU national governments. They plan to give their approval on Sept. 8. The measures would then normally be published in the EU Official Journal on Sept. 9.
“A cease-fire, yes, good news; a peace plan would be better news, but the sanctions go ahead,” British Prime Minister David Cameron told reporters yesterday at a North Atlantic Treaty Organization summit in Newport, Wales. The measures could be removed “if proper milestones are reached,” he said.
The EU is ramping up penalties against Russia in coordination with the U.S., part of a trans-Atlantic push to force Russian President Vladimir Putin to cease support for the rebels in eastern Ukraine. Putin’s backing for Ukrainian separatists and his annexation of Crimea have jolted the security order in Europe.

Expanding Penalties

EU leaders called on Aug. 30 for further penalties against Russia to be drafted within a week after Ukrainian President Petro Poroshenko said his country was being invaded by troops and tanks. The agreed cease-fire in Ukraine raises the prospect of a lasting truce that would be the biggest breakthrough yet to end a conflict that has killed more than 2,600 people and soured Russia’s relations with its former Cold War foes.
“We have to look to see if this cease-fire is valid, we’ll have to see whether Russian troops are withdrawing from where they are, whether there are buffer zones, and other things,” German Chancellor Angela Merkel told reporters in Wales.
In an initial set of economic sanctions imposed in late July, the EU barred five state-owned Russian banks from selling shares or bonds in Europe; restricted the export of equipment to modernize the oil industry; prohibited new contracts to sell arms to Russia; and banned the export of machinery, electronics and other civilian products with military uses -- so-called dual-use goods -- to military users.

New Package

The new package shortens to 30 days from 90 days the threshold for the maturity of debt whose sale in the bloc by the targeted Russian businesses is banned; prohibits European banks from offering syndicated loans to sanctioned Russian companies; expands the restrictions on dual-use goods and widens the curbs on technologies for the oil industry, according to the European official who spoke anonymously.
The EU is also due to expand a blacklist of people and companies subject to asset freezes in Europe. That’s because EU leaders a week ago, in addition to calling for more economic penalties against Russia, asked for proposals to blacklist people and institutions “dealing with” separatist groups in the Donbass region of eastern Ukraine.
The new package “will increase the effectiveness of the measures already in place,” EU President Herman Van Rompuy said in an e-mailed statement after the agreement among diplomats. “It will also reinforce the principle that EU sanctions are directed at promoting a change of course in Russia’s actions in Ukraine.”
Full details of the tougher EU sanctions will be disclosed when the decisions are published in the Official Journal. The economic penalties would normally take effect the day after publication, while the blacklist decisions would enter into force the same day.