In Digest, Russia

Three news articles are enclosed on the vote by the European Union on March 19 to continue economic sanctions against Russia until the end of 2015. The second article of the three examines the tensions among the 28 member countries of the European Union over sanctions policy towards Russia. Greece has signaled unease with the sanctions in its difficult negotiations with the EU to ease its debt obligations to the large, international financial institutions.–New Cold editors

1. EU agrees Russia sanctions to stay until Ukraine peace terms met

By Adrian Croft and Elizabeth Pineau, Reuters, March 19, 2015

Germany's Chancellor Merkel speaks during the lecture meeting at Asahi Shimbun headquarters in TokyoBRUSSELS–European Union leaders agreed on Thursday that economic sanctions imposed on Russia will stay in place until a Ukraine peace deal is fully implemented, effectively extending them to the end of the year if need be. The compromise reached at an EU summit in Brussels maintains EU unity on sanctions against Moscow over its role in the Ukraine conflict.

Strains have been growing within the 28-country bloc over sanctions which some member governments have only supported reluctantly.

EU governments were divided on whether to act now to renew economic sanctions on Russia which expire in July or to wait several months before taking a decision to see if the Ukraine ceasefire holds.

EU leaders backed a compromise hammered out by European Council President Donald Tusk together with German Chancellor Angela Merkel and French President Francois Hollande, two of the architects of the Ukraine peace plan reached in Minsk last month.

Leaders “agreed that the duration of economic sanctions will be clearly linked to the complete implementation of the Minsk agreements, bearing in mind that this is only foreseen by the end of 2015”, Tusk told a news conference.

EU leaders were also “ready to take further decisions if necessary”, he said, in a clear threat of additional sanctions.

A formal, legal decision on whether to extend sanctions on Russia’s financial, defense and energy sectors that expire in July will only be taken at the next EU summit in June.

But the link to the Ukraine peace agreement effectively extends economic sanctions until the end of the year because the Minsk accord sets a year-end deadline for Kiev to recover full control over its border.

The agreement only referred to economic sanctions, however, leaving open the possibility that some of the visa bans and asset freezes the EU has imposed on scores of Russian and Ukrainian citizens and organizations could be lifted before year-end if the situation in eastern Ukraine improved, EU diplomats said.

“If things deteriorate on the ground, we will strengthen sanctions. If, on the other hand, the situation remains stable and improves, then we might envisage a re-examination of the scale of the sanctions package and possibly ease it,” a French diplomatic source said.

Some EU ministers have said an offensive by pro-Russian separatists against the port of Mariupol would trigger stepped-up sanctions.

Merkel made clear when speaking to Germany’s lower house of parliament earlier on Thursday that economic sanctions on Russia would not be eased until the terms of Minsk had been fully met.

“We cannot and will not lift the sanctions that expire in July or September until the demands of the Minsk agreement have been fulfilled. That would be wrong,” she said.

The Minsk agreement, which set out a series of steps to defuse the Ukraine crisis including a ceasefire and withdrawal of heavy weapons, came under renewed strain on Wednesday, with Ukraine and Russia clashing publicly over the next steps and further Ukrainian military casualties from rebel attacks.

Merkel also spoke by phone to U.S. President Barack Obama on Wednesday and they agreed there would be no easing of sanctions until Russia had fulfilled all of its commitments under Minsk, the White House said.

Ukrainian Prime Minister Arseny Yatseniuk said EU leaders should discuss renewing existing sanctions or scaling up sanctions if Russia failed to implement the Minsk deal, but he rejected any talk of easing the measures.

“If Putin splits the unity … among the leaders of the EU member countries, this will be the biggest success story of President Putin and this will be a disaster for the free world,” he told reporters in Brussels after a pre-summit meeting with Tusk on Thursday.

Yatseniuk also said the EU had not yet responded to Ukraine’s request for U.N. peacekeepers or an EU police mission to monitor the ceasefire.

“We expect that our European friends will support this idea,” he said.

2. EU gets round its problem with extending sanctions on Russia

By Geoffrey Smith, Forbes, March 20, 2015

Sanctions will only be lifted when the Minsk agreement is implemented in full–and you’re more likely to bump into Vladimir Putin in the street before that happens.

The European Union moved closer to extending its sanctions against Russia, finding a formula that looks like allowing it to bypass the obligation for unanimity among its 28 members.

The U.S. has been concerned that European unity with regard to Russia is fraying, with a number of E.U. countries openly critical of the sanctions policy for varying reasons.

At a regular meeting of the 28 member states’ heads of state and government, the E.U. agreed that the sanctions adopted last year should stay in place as long as the so-called Minsk ceasefire agreement to stop the war in eastern Ukraine isn’t fully implemented.

A statement issued after the meeting said that “the duration of the restrictive measures against the Russian Federation, adopted on 31 July 2014 and enhanced on 8 September 2014, should be clearly linked to the complete implementation of the Minsk agreements, bearing in mind that this is only foreseen by 31 December 2015.”

Although officials didn’t spell it out explicitly, the formulation aims to reverse the burden of proof for extending the sanctions, which include bans on the sales of arms or sophisticated equipment for the oil and gas industry, along with measures that effectively stop Russia and its largest banks from using western capital markets.

Under E.U. law, the measures would have had to be renewed by a unanimous vote at the end of July. But a number of countries have voiced concern, anxious at the damage to their trade with Russia, due to their separate national agendas: Cyprus is a key financial hub for the Russian economy; Hungary’s conservative Premier Viktor Orban is keep to ensure continued flows of Russian gas (and to seal a deal for Russian nuclear power which the E.U. wants to ban); Italy is also concerned about its gas supplies, and about the fate of its energy companies’ investments there, and its luxury companies and high-end tourism industry are suffering from the ruble’s collapse.

Special roundtable meeting on Greece's financial debt in Brussels on March 19, 2015, photo by Emanuel Dunland, EPA

Special roundtable meeting on Greece’s financial debt in Brussels on March 19, 2015, photo by Emanuel Dunland, EPA

Most of all, the Greek government has been dropping regular hints that it would veto an extension of the sanctions unless the Eurozone relaxes the terms of the country’s bailout. That has not gone down well with German Chancellor Angela Merkel, who has had to face down a powerful export lobby at home to uphold measures that she sees as necessary to keeping the long-term peace in Europe.

Merkel’s achievement last night (with the support of the U.K., Poland and other more hawkish E.U. members such as the three Baltic states) has been to raise the bar for lifting the sanctions to a level that, almost certainly, neither Russia nor the Ukrainian rebels will ever accept. The Minsk ceasefire agreement specifies restoring Ukrainian government control over the border with Russia, as well as holding elections under Ukrainian law in the rebel-held areas, both of which appear politically impossible in the current circumstances.

The summit is therefore bad news for Russia’s Vladimir Putin, who has been trying hard to drive a wedge between the U.S. and Europe since annexing Crimea a year ago. However, there was one piece of good news for him. There is obviously no appetite for new sanctions, even though the E.U. statement said it was “ready to take further decisions if necessary.”

Bloomberg reported that the measure Russia fears most–the shutting out of Russian banks from the international financial messaging service SWIFT, wasn’t even up for discussion last night.

3. EU Reaches Agreement to Keep Russian Sanctions In Place

By Naftali Bendavid and Matthew Dalton, Wall St. Journal, March 19, 2015

BRUSSELS—European Union leaders have agreed on a plan that would likely keep the bloc’s broad economic sanctions on Russia in place until year’s end. The 28 EU leaders, gathered for a summit in Brussels on Thursday [March 19], tied the sanctions to the “complete implementation” of a recent cease-fire deal reached in Minsk, Belarus, which calls for Ukraine to regain control of its external borders by Dec. 31.

EU members now plan to delay until June any action formally extending the sanctions. But by tying the sanctions to the Minsk deal and its year-end deadline, the leaders have made it unlikely the sanctions would be rolled back before then. “We have to maintain our sanctions until the Minsk agreement is fully implemented,” said Donald Tusk, president of the European Council, which consists of the 28 EU leaders.

The decision could provide EU countries some flexibility to ease sanctions if Russia takes conciliatory action before year’s end. The agreement is a compromise between European governments that wanted to officially extend the sanctions on Thursday and those that said doing so would be provocative, given that the fragile Minsk cease-fire is showing signs of taking hold.

Ukrainian Prime Minister Arseniy Yatsenyuk, worried that some European leaders might push to weaken the sanctions now that the cease-fire is showing results, was in Brussels to urge the EU to resist that temptation and keep its united front against Russian President Vladimir Putin.

“If Putin splits the unity among EU member states and among the leaders of the EU member countries, this will be the biggest success story of President Putin and this will be a disaster for the free world,” Mr. Yatsenyuk said.

The halting success of the cease-fire has underlined the fissures among EU countries. The U.K. and Baltic states have taken a tougher line toward Russia, for example. Leaders of Cyprus, Italy and Greece, in contrast, have recently visited Moscow or announced plans to do so. Other governments, such as Hungary’s, have long made little secret of their skepticism toward sanctions.

Those divisions were on display again at Thursday’s summit. Estonian Prime Minister Taavi Roivas said that if it were up to him, the sanctions would be extended immediately. “The best way would be to decide already today to roll over the sanctions,” Mr. Roivas said. “In any case, I think the least we can do today is establish a clear linkage that as long as the full implementation of Minsk is not in place, the full range of sanctions has to continue.” Related Articles

Werner Faymann, chancellor of Austria, whose country has been among the most skeptical of sanctions, stressed instead the need to re-establish a normal relationship with Moscow as soon as that makes sense. “What is important is to set out how we normalize it again, once the Minsk agreement has been implemented,” Mr. Faymann said.

Mr. Yatsenyuk asked the European leaders to send peacekeepers to eastern Ukraine to make sure Russia abides by the Minsk agreement. Ukraine’s parliament on Wednesday called on the EU, as well as the United Nations, to send such peacekeepers. “We expect that our European friends will support this idea, because everyone wants to get peace in Europe and one of the tools to reach this peace is to deploy peacekeepers,” Mr. Yatsenyuk said.

But EU diplomats said such a move would be premature, and that for now the EU will focus on supporting the personnel who are monitoring eastern Ukraine on behalf of the Organization for Security and Cooperation in Europe. The OSCE is a larger, 57-member group that includes EU members as well as Russia, Ukraine and the U.S.

‘We expect that our European friends will support this idea, because everyone wants to get peace in Europe and one of the tools to reach this peace is to deploy peacekeepers.’ —Ukraine Prime Minister Arseniy Yatsenyuk.

The EU has already extended sanctions through Sept. 15 on individuals and firms involved in Russia’s annexation of Crimea. The sanctions under discussion Thursday are the bloc’s broader, tougher measures, including restrictions on Russia’s banking, energy and defense sectors. Currently those penalties are set to expire in July.

The Minsk cease-fire deal called on both sides to withdraw soldiers and heavy equipment from the front lines, and observers have reported a notable decrease in violence in eastern Ukraine since then. But the provision giving Ukraine control of its border is considered crucial by Western leaders, who accuse Russia of sending a flood of fighters and weapons over the boundary line. Moscow has denied assisting the rebels.

Vladimir Chizhov, Russia’s ambassador to the EU, repeated this week in an interview with Japan’s Mainichi news organization that the sanctions, similar to those imposed by the U.S., are illegal and ineffective.

“The result has been lost jobs, stunted economic growth and forfeited business opportunities in both Russia and EU countries,” Mr. Chizhov said, according to a transcript from the Russian embassy. “Time will tell which side has incurred larger economic damage.”

Ultimately, European and Ukrainian officials worry that Russia’s goal is to establish control, through perennially restless separatists, of a swath of eastern Ukraine, which would give Moscow significant influence over Ukraine itself. Similar “frozen conflicts” already extend Russia’s influence into countries such as Georgia, Moldova and Azerbaijan.

“Unfortunately we are looking at permanent conflicts,” Finnish Prime Minister Alexander Stubb said. “And it looks like some people don’t even want to solve them.”

Read also:
Ukraine: IMF package foreshadows a permanent ‘winter’, by Michael Roberts, March 17, 2015


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