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03/12/2016

EU delays new Russia sanctions

Global Europe

EU delays new Russia sanctions

Anti-Russian protestors. Brussels, 9 September. [Joel Schalit]

European Union envoys failed yesterday (10 September) to reach a decision on whether to implement new sanctions against Russia over military involvement in the war in Ukraine and will meet for talks today, EU diplomats said.

The diplomats said that while Germany was pushing to have the sanctions implemented, several other EU countries wanted to hold off because a ceasefire in Ukraine was holding.

“Some countries are asking for time,” Italian Foreign Minister Federica Mogherini, who has been chosen to be the EU’s new foreign policy chief, told reporters in Brussels, declining to say who those countries were. “Unity in this is absolutely crucial and strategic,” she said.

EU diplomats said that countries with close ties to Russia such as Italy, Austria and Finland are reluctant to implement the new sanctions.

German Chancellor Angela Merkel called for the sanctions to go ahead, adding that they could always be suspended at a later date if there was progress towards a peace plan for Ukraine.

“We are in favour of making these sanctions public now,” Merkel told the German parliament.

Ukraine’s president said yesterday Russia had removed the bulk of its forces from his country, raising hopes for a peace drive now underway after five months of conflict in which more than 3,000 people have been killed.

EU diplomats said, however, that the general idea was still for the sanctions to be implemented through publication in the Official Journal of the European Union on 13 September.

The EU sanctions list dated 6 September shows battle-tank maker Uralvagonzavod, aerospace company Oboronprom and state-controlled United Aircraft Corporation (UAC) are among Russian companies to face new EU sanctions if the bloc decides to implement them, according to a draft obtained by Reuters.

Oboronprom is the main shareholder in Russia’s top producer of civilian and military helicopters: Russian Helicopters.

Uralvagonzavod is a maker of Russian battle tanks. UAC was created by Russian President Vladimir Putin during his 2000-2008 presidency to be a national champion for plane manufacturing.

The EU sanctions would prohibit the companies from raising capital in Europe via “financial instruments with a maturity exceeding 30 days”, the draft document said.

Moscow has lobbied for a delay in the implementation of new sanctions. Russia’s ambassador spoke to the head of the European Council, Herman Van Rompuy, who chairs EU summits, and the EU’s High Representative for Foreign Affairs Catherine Ashton on Monday, diplomats said.

His message was that the EU should look at what was happening on the ground in Ukraine and reflect on its position that the ceasefire was holding.

>> Read: EU’s new Russia sanctions may be frozen ‘if ceasefire holds’

One of the difficulties in making a decision on sanctions implementation is that the EU has no agreed way to establish if the ceasefire in Ukraine is holding – it is up to individual governments to make their own assessment. 

US sanctions coming

The United States and European Union plan to stop billions of dollars in oil exploration in Russia by the world’s largest energy companies including Exxon Mobil Corp and BP Plc, U.S. government sources said.

The planned sanctions over Russia’s aggression toward Ukraine would ban U.S. and European companies from cooperating with Russia on searching its Arctic territory, deep seas or shale formations for crude, said two U.S. officials who spoke on condition of anonymity because the measures have not been made public.

The measures, which one of the sources said represented “preliminary thinking,” would expand sanctions the Obama administration announced in July and ban U.S. and EU cooperation on all energy services and technology in the unconventional oil fields. The previous sanctions only banned some technology at those locations.

Russia, along with the United States and Saudi Arabia, is one of the world’s top oil producers and is the main energy supplier to Europe. But its conventional oil fields are in decline, so it must move to frontier sources in Siberia and the Arctic to keep the oil flowing.

Exxon signed a $3.2 billion agreement in 2011 with Russian company Rosneft Oil Co to develop the Arctic. The Texas-based multinational was considered one of the few companies capable of drilling in the harsh, deep waters there.

The new sanctions, if applied, would be harmful to Russia’s future prospects because they would target fields five or 10 years from producing oil. But application of the sanctions could be prevented if Russia sticks to a cease fire, and depends on several factors including actions by the EU.

Once the EU implements the new ban on sharing energy technology and services, the United States would follow suit with similar measures, including barring the export of U.S. gear and expertise for the specialized exploration that Russians are unequipped to pursue on their own.

Any new sanctions on services and technology related to Russia’s oil frontier would signal that the United States and EU are “taking the gloves off and are aiming directly at the major source of Russia’s potential future energy production growth,” said Robert McNally, a White House energy adviser to former President George W. Bush who now heads the Rapidan Group, an energy consultancy.

He cautioned that the new plan would only succeed if EU and U.S. cooperation is tight. “Both must ensure other countries do not step in and provide services and technology they will be withdrawing,” McNally said.

In July, Exxon began bringing a rig called West Alpha from Norway to the Russian Arctic. The company is hoping for a major discovery in the Kara Sea with Rosneft.

Exxon spokesman Alan Jeffers declined to comment on the future of the rig but said it is company policy to comply with all laws and that it is assessing sanctions on Russia.

BP will study the sanctions and “as always we will comply with all applicable sanctions,” said spokesman Brett Clanton

Background

The EU's latest proposed sanctions on Russia, adopted last week (5 Sept.), are not “stage three” category but expand the range of current financial sanctions targeting officials responsible for Russian military actions in Ukraine, restrictions on arms and dual-use materials, and technology.

In diplomatic jargon, “third level” sanctions refer to economic sanctions that are intended to hit Russia's major economic players. 

The European Commission last week welcomed news that a ceasefire in Eastern Ukraine had been agreed on between Kyiv and Moscow, but added that those needed to be verified, and that decisions on sanctions would be taken in view of those developments.

At the 30 August summit, some EU leaders spoke about the need of military assistance to Ukraine. Many demanded tougher sanctions, but Slovakia, Hungary and Cyprus made it clear they oppose further sanctions which they claim would hurt their countries more than Russia.