EU struggles to unite on ways to punish Russia beyond blacklist
European Union governments struggled to find ways of punishing Russia for annexing Crimea, reflecting east-west divisions within the EU and concerns that trade curbs would do self-inflicted damage to Europe’s economy.
It is unclear whether EU leaders will agree on a road map for economic sanctions at a two-day summit starting on Thursday in Brussels, five EU officials told reporters on Wednesday. A less controversial option would be to expand an existing blacklist of 21 Russian and Crimean officials, they said.
“The heterogeneity of EU member states’ interests raises doubts within the Kremlin about how determined the EU will actually be,” Georg Zachmann, a fellow at the Brussels-based Bruegel research group, said in a blog post.
Special trading relationships that several countries have with Russia, coupled with the economic fallout from Europe’s debt crisis, are frustrating a united response to the most serious threat to the European order since the Cold War.
Sanctions require the agreement of all 28 EU countries, a consensus-building process that cannot match Russian President Vladimir Putin’s speed in mobilizing troops in Crimea, staging the secession referendum and moving to annexation.
The need for EU unanimity gives leverage to countries like Cyprus, which is chafing at the terms imposed by European governments in exchange for a 10 billion-euro ($14 billion) bailout that ravaged the island’s economy, the third smallest in the 18-nation euro area.
Cyprus remains a haven for Russian investment as it tries to fix an economy that shrank 6 percent last year. Foreign Minister Ioannis Kasoulides told state-run RIK radio on Tuesday that Cyprus opposes further sanctions.
Whether fellow skeptics including Hungary and Bulgaria would endorse a ratcheting up of sanctions in exchange for financial compensation won’t become clear until the leaders assemble in Brussels tomorrow afternoon.
An agreement on economic sanctions “can’t realistically be expected,” Czech Prime Minister Bohuslav Sobotka said at a parliamentary committee meeting in Prague on Wednesday, according to the CTK news service.
At an emergency summit on March 6, the EU suspended trade and travel talks with Russia and paved the way to the imposition on March 17 of asset freezes and visa bans on 13 Russian and eight Crimean officials. The bloc also told Russia there would be “additional and far-reaching consequences for relations in a broad range of economic areas” unless it backed down. EU officials were not sure whether the leaders will view Putin’s takeover of Crimea as the trigger for more measures.
Germany, which dominated the debt crisis response, is also tugged between trade and energy links with Russia and calls by neighbors such as Poland and the Baltic states for a firmer response to aggression on the EU’s doorstep.
Germany relies on Russia for 35 percent of its oil and natural gas imports. About 6,200 German companies generate exports of 36 billion euros and imports of 40.4 billion euros in trade with Russia, according to the BGA exporters’ lobby.
EU economic retaliation must be carefully calibrated, Austrian Chancellor Werner Faymann said on Tuesday. Austria buys about 55 percent of its gas from Russia, and Austrian banks Raiffeisen Bank International and UniCredit Bank Austria are among the biggest in Russia.
Business ties are good for “promoting peaceful development on both sides,” Faymann said.
EU leaders normally set broad strategy, lessening the likelihood that the summit will decide legally binding steps. While sanctions have made the most headlines, the EU will also sign the political provisions of a trade agreement with Ukraine and consider speeding up its economic assistance.
The European Commission, the EU’s executive arm, on Wednesday proposed adding 1 billion euros to a previously approved 610 million euros in budget support for Ukraine. The European aid would accompany an International Monetary Fund package that is being negotiated.