European sanctions against Russia enter into force

Today, on 12 September, a new wave of sanctions against Russia that the European Union (EU) agreed upon during a Council meeting on 8 September will enter into force. In light of the decisive role that Russia has played in intensifying the conflict in eastern Ukraine between the Ukrainian government and the pro-Russian, Kyiv-wary separatists, Brussels finds it necessary to impose additional sanctions on Moscow.

European sanctions and their effects

The bulk of sanctions deal with further restricting Moscow’s access to EU capital markets. EU nationals and companies may no longer provide loans to five major Russian state-owned banks. In addition, trade in new bonds, equity or similar financial instruments with a maturity exceeding 30 days, issued by those same banks, has been prohibited. The same restrictions have been extended to three major Russian defence companies and three major energy companies (Rosneft, Gazprom neft and Transneft). For Rosneft, this is a serious matter, keeping in mind that it asked the Russian government for a 42 billion dollar loan last month and is thus experiencing severe financial difficulties, which will be further exacerbated by these European restrictions.  

Furthermore, the EU has added another 24 names to a list of Russian officials and rebel leaders in Ukraine suspected of being involved in actions against Ukraine’s territorial integrity, who are now subject to visa bans and asset freezes. Besides, the sanctions prevent the supply of certain services necessary for deep water, arctic, and shale oil exploration and production, for example drilling, well testing and logging services. Also, the ban on exporting dual-use goods and technology for military use in Russia has been extended to also include a list of nine defence companies. In terms of the effects of these sanctions on the Russian economy, experts believe that although Moscow will presumably suffer more than Europe from these sanctions, the European economy will definitely also be hit. In what way the European and Russian economies will precisely be affected, is still unclear. 

Herman van Rompuy - President of the European Council – at the same time said that “[d]epending on the situation on the ground, the EU stands ready to review the agreed sanctions in whole or in part [...] We have always stressed the reversibility and scalability of our restrictive measures.”
The United States announced last night (on 11 September) that it will support the Union by also intensifying sanctions on Russia. “We will deepen and broaden sanctions in Russia’s financial, energy, and defence sectors. These measures will increase Russia’s political isolation as well as the economic costs to Russia, especially in areas of importance to President [Vladimir] Putin and those close to him,” said US President Barack Obama.

The Kremlin’s response

After the EU had announced the entering into force of the sanctions upon publication in the Official Journal of the European Union on 12 September, the Russian Foreign Ministry accused Brussels of undermining the peace efforts in Ukraine. By imposing more sanctions on Moscow, “the EU has practically decided against the process of a peaceful settlement,” the statement read. However, Russia also assured that “despite the EU position being non-constructive, Russia will continue to do its utmost to help enforce the existing peace plan, as well as to stabilise the situation in the south-east of Ukraine overall.”

At the same time, the Kremlin declared its intention to retaliate with its own sanctions in areas where Europeans “depend on Russia more than Russia does on them,”  proclaimed Andrei Belousov, an aide to President Putin. Even though the specifics are not yet known, analysts believe that the Kremlin could ban the imports of automobiles to Russia, which is at present a crucial market for used European and Japanese cars. Moreover, Moscow could close off its airspace for Western airlines, potentially leading to costly detours for long-haul flights between Europe and Asia. Russia has already banned a variety of food and agricultural imports, such as meat, fruit, vegetables and dairy products from the EU, the United States, Australia, Canada and Norway, as retaliation for earlier rounds of sanctions.   

Western countries, especially those depending on Russian gas, are watching closely to see whether or not Moscow will be prepared to use its gas exports– an area which so far has been left out of the European sanctions – as a weapon in the trade war with Europe this winter. Poland already complained that Russia’s state-owned energy company Gazprom cut deliveries by about half this week.

President Putin looking East

Today, at the summit of the Shanghai Cooperation Organisation - a Eurasian political, economic and military organisation – in Dushanbe, the capital of Tajikistan, Putin declared his intention to shift his attention away from Europe towards China and the former Soviet Republics in Central Asia. “I believe it is necessary to further improve the efficiency of our interaction to meet the challenges of the time,” he said.

Cease-fire generally upheld

On Friday 5 September the Ukrainian government and the separatists in eastern Ukraine signed a cease-fire in Minsk – the capital of Belarus- , which despite some incidental shootings and sporadic violence, seems to be generally upheld. Two days before, on 3 September, Petro Poroshenko - Ukraine’s President – had surprisingly announced via Twitter that a “permanent cease-fire” had been reached between himself and Russia’s leader Vladimir Putin. An hour later, however, the Kremlin firmly denied the existence of such a cease-fire, because “Russia is not a party to the conflict.” Moscow did say that Putin and Poroshenko had discussed “how to end the conflict.”

As part of the cease-fire agreement, the Ukrainian army and the rebels exchanged dozens of prisoners last night, just outside the rebel stronghold in Donetsk. On 8 September, Poroshenko announced that pro-Russian separatists had already released 1200 Ukrainian prisoners. Two days later the Ukrainian President added that according to his information, the Kremlin had withdrawn 70 per cent of its troops from Ukrainian territory. A NATO (North Atlantic Treaty Organisation) official on the other hand disclosed on 11 September that Russia still has at least 1,000 soldiers in eastern Ukraine.

Furthermore, Poroshenko declared that he is willing to consider on the short term granting “special status” to the eastern Ukrainian regions. More autonomy, however, should not in any way lead to the federalisation of Ukraine or to the alienation of those regions from the rest of the country. Analysts believe that the separatists will presumably not accept Poroshenko’s idea, opting instead for complete independence from  Kiev or at least federalisation. In sum, the shaky cease-fire signed in Minsk, the subsequent mutual exchanges of prisoners, and President Poroshenko’s generally accommodating attitude towards the eastern Ukrainian separatists hopefully signal the beginning of the end to a conflict that has since its start killed over 2,700 people. At the same time, these recent glimmers of hope will ideally also pave the way for peaceful and democratic parliamentary elections that are planned in Ukraine for the 26th of October 2014.

Sources: Al Jazeera English, The Guardian (1), (2), Radio Free Europe/Radio Liberty, European Forum (1), (2), de Volkskrant, Council of the European Union Press Release, EurActiv, the New York Times, EUobserver, BBC News, Official Journal of the European Union, Reuters

Image: cover of Time Magazine photographed by Nadia Marks

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