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EU lays out impact of financial sanctions on Russia

Source: Reuters - Wed, 16 Apr 2014 15:46 GMT
Author: Reuters
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* Commission sets out potential impact of further Russia sanctions

* EU states must respond to Commission on measures by April 22

* If situation in Ukraine deteriorates, sanctions could be imposed

By Luke Baker

BRUSSELS, April 16 (Reuters) - The European Commission handed documents to EU member states on Wednesday explaining the potential impact on their economies of imposing stricter trade and financial sanctions on Russia over its actions in Ukraine, diplomats said.

Worried about potential leaks of the sensitive data, the Commission informed each country only about the risks it would face, rather than sharing full details with all 28 member states. The assessments were handed out in brown paper envelopes to individual EU ambassadors during a meeting in Brussels.

The documents examine several categories of sanctions, including on energy, finance and trade, setting out the impact imposing the restrictions would have on the bilateral economic relationship between Russia and each country.

"The important thing is that the measures are balanced," said one EU diplomat briefed on the process.

"We can't have a situation where a set of sanctions ends up having a retaliatory impact on one member state or two or three member states. If there are going to be repercussions from this, they have to be shared out."

Countries have until April 22 to respond to the Commission, which will then tailor the package. The aim is to have a consensus by next week so a decision can be taken by EU leaders if the situation in Ukraine worsens.

At a meeting last month, EU leaders agreed they would move to what they have dubbed a third phase of sanctions if there are "any further steps by the Russian Federation to destabilise the situation in Ukraine".

So far the EU has imposed limited sanctions on Moscow, including travel bans and asset freezes on around 30 people identified as being behind the seizure and annexation of Crimea.

RUSSIAN FLAG

The government in Kiev accuses Russia of orchestrating unrest across southern and eastern Ukraine, where pro-Russian paramilitaries have seized buildings and Ukrainian military vehicles, raising the Russian flag. Russia denies stirring up the separatists in the area.

British Foreign Secretary William Hague says it is clear Moscow is behind it and NATO secretary general Anders Fogh Rasmussen made similar comments on Tuesday.

But some EU member states want more evidence that a red line has been crossed before they agree to move to the next stage of sanctions, fearing that pushing ahead too quickly could provoke Russia further or end up hurting their own economies.

Britain, which is in the forefront of those pushing for stricter sanctions, is also among those with the most to lose since Russian companies and wealthy individuals have extensive property, business and banking interests in London.

If there is no further deterioration in Ukraine in the coming days, diplomats say it is unlikely the EU will move to the next stage of sanctions for now. Much also rests on what emerges from talks in Geneva on Thursday among foreign ministers from the United States, Russia and Ukraine and the EU's foreign policy chief.

If there is a deterioration in Ukraine, which two EU diplomats said would involve evidence of Russian troops moving into Ukraine as an invading force, then EU leaders could hold a summit next week to decide on phase three sanctions.

Among the countries with the most to fear from such a step is Germany, which gets around a third of its gas and oil from Russia and exports many industrial goods to Moscow.

Not only would the sanctions have an impact on Germany's economy, it is likely Russia would retaliate with its own measures, compounding the impact.

The same goes for others with close ties to Russia, including Italy, Austria, Cyprus and Greece, which is why forging a consensus among all EU states will prove difficult. (Writing by Luke Baker; Editing by Giles Elgood)

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