Ukraine conflict: EU squeezes Russia

Russian oil tanker - file pic Russia's vast oil industry is likely to be affected by the new sanctions

EU ambassadors are likely today to adopt economic sanctions against Russia.

Up until now they have targeted individuals and companies for travel bans and a freeze of assets. The list has grown to 87 people and 18 entities. New names from President Vladimir Putin's inner circle are being added.

Now Washington and Europe's capitals have agreed that new, tougher economic measures have to be imposed. But the squeeze on Russia is some way off full-blown economic sanctions.

Firstly, although there is expected to be an arms embargo it will only apply to new contracts. It will not affect, for instance, the sale of the French Mistral helicopter carriers.

Secondly, there will be restrictions on high-technology energy exports, but equipment related to the gas sector is excluded. (The Europeans are wary of targeting a sector they are so dependent on.)

Thirdly, it will be more difficult for Russian banks to access capital on European financial markets but this will only apply to state banks.

Pro-Russia separatists near Shakhtarsk in Donetsk region The EU accuses Russia of arming the eastern rebels fighting Ukrainian forces
Lost business

Europe's leaders are trying to put pressure on President Putin but they remain keen to limit the damage to their own economies. But this time around there will be pain. Over the past 10 days EU ambassadors have been working to ensure that the pain is shared.

The City of London will lose some business. How much? It is hard to say, but it might run into hundreds of millions of pounds.

Germany has the largest share of exports of high-technology equipment.

France's arms exports are valued at nearly ten times those of the UK.

Only two weeks ago Germany and Italy and some other countries were resisting moving to what they call Tier Three economic sanctions. They were not prepared to damage fragile eurozone economies which have seen industrial production slide in recent months.

So what changed? Chancellor Angela Merkel believes she has personally been deceived by the Russian president and he cannot be trusted. But Germany has made a wider calculation that unrest in eastern Ukraine risks destabilising a region close to the heart of Europe.

So this weekend the German Finance Minister Wolfgang Schaeuble pointed out that "an erosion of peace and stability would be the biggest danger to economic development". So he made the case for more sanctions.

East-west chill

The German government seems to have brought the voters with it - 52% say they now support tougher action. The views of the public have been changed by the shooting down of the Malaysian passenger jet. So the German business lobby, which had been so opposed to tougher sanctions against Russia, has tempered its opposition. The executive director of the German Engineering Federation, whilst predicting that the consequences of the latest measures would be "bitter" for some manufacturers, did not oppose the new sanctions.

If the EU ambassadors do adopt these new economic sanctions it will mark a deepening of east-west tension. It is not a return to the Cold War but it does represent a freezing in relations not seen in 20 years. Over that period Western leaders have brought Russia into the G8 grouping of advanced industrialised countries and treated it as a reliable partner in the community of nations. European countries have expanded trade, to the point that some of them are very dependent on the Russian relationship. But that bond has been broken by events in Ukraine.

Europe's leaders did not want to move to economic sanctions, but they were moved by two considerations: the outrage at the way investigators have been blocked from access to the crash site of the downed plane and secondly the fact that Russia, since the incident, has been allowing heavy weapons across the border into Ukraine.

The calculation in Europe is that it had to act for its own credibility and that it may have to go further to ensure that President Putin and his inner circle understand that their actions carry consequences.

How will Russia respond? Hard to say, although the Foreign Minister Sergei Lavrov said yesterday that Russia would not retaliate or "fall into hysterics".

But if all goes as expected the EU will today take a significant step, aware that it has to risk some damage to its own economic interests in order to put pressure on President Putin and Russia.

Gavin Hewitt Article written by Gavin Hewitt Gavin Hewitt Europe editor

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  • rate this

    Comment number 249.

    The simple solution. Have the Russian citizens who are currently fighting as "pro-Russian Ukrainians" and let Ukraine sort out its on internal issues. There was a mechanism built into the constitution for areas to leave Ukraine legally. This has not been used. So when people say Russia is destabilizing, yes they are. Russia has in at least the means to close the border.

  • rate this

    Comment number 248.

    Since the 2nd world war there have been 248 armed conflicts around the world.
    201 of these have been directly started by the USA, over 30 million people killed all in th ename of American Interets.

    killing women and children & people is not in the interests of the American citizens? Obviously it is only in th einterests of the rich and powerful coporations that thrive on Greed.

  • rate this

    Comment number 247.

    EU sanction on Russia is pure madness will damage our living standard for now and the future with the possibility of freeze this winter.
    Follow the line of the USA for Europe is always a mistake do the contrary of the USA i always good for Europe. bat the leader never learn.

  • rate this

    Comment number 246.

    #241 s_divx

    If Ukrainians are still fighting WWII --please say so.

  • rate this

    Comment number 245.

    #241 s_divx

    I have met ´Ukrainians´ (from the East) who were not at all sympathetic to the ´Orange Revolution´

    --How would you explain ?

  • rate this

    Comment number 244.


    But what we in the UK do know about is there are huge numbers of escaped oligarchs that infest London. They are doing substantial damage to the UK & its democracy. (How they got their money is down to you - but was it honest?)

    Please take them back and look into how with the collapse of the USSR so much wealth was swiped by so few. It was not, and is not fair on the Russian people!

  • rate this

    Comment number 243.

    You may believe your words carry weight, but they are devoid of any content except emotion.

    Your bare faced ethnic hatred is vile, and criminal under the common law. You may believe otherwise, due to US politics of the moment, but you reveal yourself as a racist and a base intellect to educated and decent british folk.

    Nobody in Britain believes one ethnicity is 100% guilty in any conflict.

  • rate this

    Comment number 242.

    The BBC are an anti-democratic disgrace in the way they seek to cripple their bloggers. Just because we show up the BBC's faults we are to be limited to 400 characters (once every 10 mins!!)

    They started well with unlimited blog lengths - then with 400 chs and the idiotic net scoring system they completely lost their way.

    At once stroke they prevented proper comment and drove extremism - daft!

  • rate this

    Comment number 241.

    @ 240. democracythreat

    The fact that I am Ukrainian and have relatives in Moscow and scattered throughout Ukraine and Russia I think I have a much better grasp on what is going on in East Ukraine. I can 100% say to you that you are simply regurgitating someones propaganda. Personally I don't comment on subjects I know nothing about but I guess you are not me.

  • rate this

    Comment number 240.

    "The people causing all the trouble in East Ukraine are Russians.."

    Well. They didn't invade the west. Furthermore, even if they are ethnic russians, they are still ukrainians and they are still human beings.

    It is not contentious to state that the west is shelling the people of the east because they demand total political control.

    This is what we now call a just war.

    Fascism, for real.

  • rate this

    Comment number 239.

    It is utterly ridiculous that when the very brave Lyse Doucet writes articles -- only ´Twitter´ is offered for comments.

    The problems with both ´Twitter´and ´Facebook´are well known ( privacy) --and yet the BBC is willing to force Blog contributors to sacrifice the little ´Freedom´ (to say NO) that is available.

    --and are proud of it ?

    For all I disagree -- Why commit treachery ?

  • rate this

    Comment number 238.

    235 +

    Looking at the HTML, CSS and Java script the blogs that didn't work have different code set to this one that does work!

    On Topic

    What London will not do it what it should do and that is freeze all bank accounts of all Russians in the UK. Moving on to seizure of assets and eventual expulsion of all Russian citizens, or perhaps internment.

    Half hearted messing will fail.

  • rate this

    Comment number 237.

    Did it really take 300 innocent victims including women, children and babies for the EU to grow a backbone. As for all the anti-american or pro-russian comments you guys should be be ashamed. The people causing all the trouble in East Ukraine are Russians, the special forces soldiers and leaders are Russian so its not Ukrainians killing Ukrainians, its Ukrainians protecting their land and families

  • rate this

    Comment number 236.

    Still alot of anti Russia on here what about the plane Ukraine shot down in 2003 and how Many has America...trouble is our leaders dont care about the.... truth....what about the ukrainian government killing their own people...are they no killing people in their own country ie east Ukraine...about time Obama and Kerry Shut up.....and leave Europe alone, we dont want more missiles in Europe

  • rate this

    Comment number 235.

    233.quietoaktree "A total collapse of BBC blogs has occurred"

    It may be technical - in which case it suggests dire management decisions: such as firing the person who knew how to keep them working.

    Or worse a deliberate choice by BBC management driven by Tory Party requirements.

    The latter is probable as the BBC have said nothing about having a problem.

    It is only the newer parts of the system

  • rate this

    Comment number 234.

    I believe anthropologists will look at the decades after the internet, and conclude that the old systems of political propaganda began to fail miserably, but were nevertheless pursued by the hapless journalists and politicians who inherited them.

    Curiously, a side effect of having to be a bit dim to swallow the state spin is that government policy is now followed only by fairly low intellects.

  • rate this

    Comment number 233.

    A total collapse of BBC blogs has occurred.

    The emphasis on´Mobile´ and the determination to ´cut´ HYS --suggests an arrogance-- as NEVER any apology is offered.

    The ´Young Digital Turks´ were given the BBC ´on a silver platter`

    --since then, arrogance has reigned.

    This will be the BBC´s self destruction --by destroying trust the ´old school´ built up over decades.

  • Comment number 232.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 231.

    229 This is a

    Thank-you. I was not aware of that. Interesting link.

    According to the good burghers of Zero Hedge, America spent between 4Billion and 5B dollars( a paltry sum really) to destabilise Ukraine.

    Does this count as state sponsored terrorism??

    And who should we be rooting for, an administration that says "F--- the Eu" (Nuland) or one that keeps EU industries going and homes heated.

  • rate this

    Comment number 230.

    usa are all out for Russia, because they stood up to them on Syria. that's it upset Russia we all suffer with higher energy prices thanks mr Cameron.


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