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European Officials Weigh Tougher Sanctions on Moscow European Officials Approve Tougher Sanctions on Moscow
(about 3 hours later)
LONDON — Leaders of the European Union on Tuesday prepared to approve an array of more rigorous sanctions designed to punish Russia for supporting the separatists battling government forces in eastern Ukraine. LONDON — The European Union on Tuesday approved a package of expanded sanctions against Russia over the conflict in eastern Ukraine, where Moscow has been widely accused of supporting separatist rebels.
Despite concerns that their economies could pay a price for confronting the Kremlin more aggressively, European governments were moving in lock step with the United States on a new round of sanctions, a day after the leaders of Germany, Britain, France and Italy agreed during a video conference with President Obama that additional action was necessary in the wake of a buildup of Russian forces along the border with Ukraine. The new sanctions target Russia’s state-owned banks, and will restrict sales of arms, some kinds of technology and some equipment used by the oil industry. European diplomats also drew up a list of people who will face individual sanctions, including three close associates of President Vladimir V. Putin of Russia.
Imposition of the sanctions would mark an expansion and escalation of a confrontation with Russia that is arguably the most serious of the post-Cold War era and a test of the European Union’s ability to act decisively in a foreign policy crisis. The sanctions could take effect as soon as Aug. 1, after remaining legal formalities are completed. They include an embargo on all new weapons sales to Russia, though existing deals, including a French contract to supply warships, would not be affected, according to diplomats who spoke on the condition of anonymity Tuesday because the agreement had not yet been formally announced.
Ukrainian military forces have been pushing the pro-Russian separatists back in recent days amid intensified fighting. The battles have further complicated efforts by an international police force to reach the wreckage of Malaysia Airlines Flight 17, which was shot down over a region that is now a battlefield. The experts were prevented from reaching the crash site again on Tuesday by sharp clashes near the site and reports of explosions in Donetsk. The sanctions also would affect sales of what are known as dual-use goods, those with both military and civilian applications — but the restrictions would apply only to military buyers, the diplomats said.
The combination of the new sanctions, the Ukrainian military offensive and an accusation on Monday by the United States that Russia had violated a landmark arms control treaty has put President Vladimir V. Putin under additional international pressure and threatens to leave Moscow more isolated from Western Europe, the United States and their allies. In addition, an international court on Monday ordered Russia to pay investors more than $50 billion for the seizure of the now-defunct Yukos oil company a decade ago. The president of Lithuania, Dalia Grybauskaite, welcomed the decision “on a wide range of sanctions on Russia” using her Twitter account. But she expressed unease that France would be able to maintain its naval deal with Moscow. “Unfortunately, nothing to stop the deal of Mistral yet,” she wrote, referring to the class of assault ships involved. Lithuania is one of five European Union states that directly border on Russian territory.
But Mr. Putin, backed by public opinion at home, has shown no signs of backing down even as the new sanctions risk a substantial impact on the Russian economy. Offering a possible foretaste of potential reprisals against Europe, Moscow reacted tartly on Tuesday to a Japanese announcement of sanctions on individuals deemed to be contributing to instability in eastern Ukraine, calling the measures “unfriendly” and threatening countermeasures, Reuters reported. On the financial side, the sanctions would bar individuals or companies in Europe from buying or selling bonds and other securities issued by Russian state-owned and development banks. Those measures could be felt significantly in London, where those securities are extensively traded.
Sales of technology for oil production and exploration in deep water, in shale deposits and in the Arctic would be restricted, but not technology for natural gas. Several European nations depend heavily on gas supplies from Russia.
European governments were moving in lock step with the United States on the new round of sanctions, despite concerns that they would pay an economic price for confronting the Kremlin more aggressively.
Obama administration officials said Tuesday that they expected to announce their own package of new sanctions later in the day or on Wednesday.
Secretary of State John Kerry said at a news conference in Washington on Tuesday that the West would continue to impose sanctions “if that is what we must do,” though he called once again for the separatists in Ukraine to agree to a cease-fire “now, not in the future” and reach a peace agreement that would make sanctions unnecessary.
A diplomat in Brussels said that four individuals were singled out for sanctions by the European Union: three Russian “oligarchs” who are close to Mr. Putin and one figure from Donetsk, a provincial capital in eastern Ukraine that has been a center of rebel activity.
The new sanctions seemed likely to escalate a diplomatic confrontation with Russia that is seen as the most serious of the post-Cold War era, and posed a test the European Union’s ability to act decisively in a foreign policy crisis.
Leaders of the union’s four largest economies — Germany, Britain, France and Italy — agreed during a video conference on Monday with President Obama that additional action was necessary after Russia built up its forces along the border with Ukraine.
Mr. Kerry reiterated on Tuesday that there was “clear evidence” of artillery and rocket fire into Ukraine from Russia and that Russia and its “so-called volunteers” were continuing to supply the rebels in Ukraine with fighters and munitions. By contrast, he said, there was “not a shred of evidence” that Russia was making any serious effort to rein in the rebels and resolve the conflict.
Ukrainian military forces have been pushing the pro-Russian separatists back in recent days, amid intensified fighting. The battles have further complicated efforts by a group of international experts and police officials to reach and secure the wreckage of Malaysia Airlines Flight 17, which was shot down over an area near the border that is now a battlefield. The group was prevented again on Tuesday from traveling to the crash site from Donetsk.
The combination of new sanctions, the Ukrainian military offensive and an accusation on Monday by the United States that Russia had violated a landmark arms control treaty has put Mr. Putin under additional international pressure and has threatened to further isolate Moscow from Western Europe, the United States and their allies. In addition, an international court on Monday ordered Russia to pay investors more than $50 billion for the seizure of the now-defunct Yukos oil company a decade ago.
But Mr. Putin, backed by public opinion at home, has shown no signs of backing down. Offering a possible foretaste of potential reprisals against Europe, Moscow reacted tartly on Tuesday to a Japanese announcement of sanctions on individuals deemed to be contributing to instability in eastern Ukraine, calling the measures “unfriendly” and threatening countermeasures, Reuters reported.
“The imposition by Tokyo of new sanctions on Russia inevitably threaten a whole range of bilateral relations, and set them back,” the Foreign Ministry in Moscow said in a statement.“The imposition by Tokyo of new sanctions on Russia inevitably threaten a whole range of bilateral relations, and set them back,” the Foreign Ministry in Moscow said in a statement.
Despite the diplomatic unity among the Western allies over the necessity of confronting Mr. Putin more directly, there were immediate signs of concern that the new sanctions could boomerang on still-fragile European economies that rely partly on Russian energy supplies and are bound closely to Moscow through banking and finance, industrial trade and technology and arms deals. Europe’s economic ties to Russia are much closer than those of the United States. Though the Western allies appeared united over the necessity of confronting Mr. Putin more directly, there were immediate signs of concern that new sanctions could boomerang on Europe, whose economies rely partly on Russian energy supplies and have closer ties to Russia than the United States does, especially in banking and finance, industrial trade and technology and the arms industry.
In London, the oil giant BP, the biggest foreign investor in the Russian oil industry with a 19.75 percent stake in the Rosneft state oil company, warned bluntly on Tuesday in a message to investors that “any future erosion of our relationship with Rosneft, or the impact of further economic sanctions, could adversely impact our business and strategic objectives in Russia, the level of our income, production and reserves, our investment in Rosneft and our reputation.” In London, the oil giant BP, which owns 19.75 percent of the Russian state oil company Rosneft, warned investors bluntly before the announcement on Tuesday that “any future erosion of our relationship with Rosneft, or the impact of further economic sanctions, could adversely impact our business and strategic objectives in Russia, the level of our income, production and reserves, our investment in Rosneft and our reputation.” BP is the largest foreign investor in Russia.
European companies have begun warning for some time that their earnings could start to suffer because of the conflict in Ukraine, escalating sanctions against Russia, and Russia’s own sputtering economy. European companies have been warning for some time that their earnings could suffer because of the conflict in Ukraine, sanctions against Russia and the sputtering of the Russian economy. Deutsche Bank, based in Frankfurt, said that “emerging geopolitical events in Ukraine and the Middle East may impact financial markets and our clients.”
Deutsche Bank, based in Frankfurt, said that “emerging geopolitical events in Ukraine and the Middle East may impact financial markets and our clients.” The European sanctions are also bound to affect a wide range of European companies, including banks in Vienna, industrial equipment makers in Germany and automakers and parts suppliers across the continent. The German Engineering Federation, which represents makers of machine tools and other equipment, said on Tuesday that sales to Russia were down 20 percent in the first five months of 2014, compared with the same period in 2013.
The proposed European sanctions are also bound to hit a wide range of companies, including Viennese banks, European automakers and part suppliers, and German makers of industrial machinery. The German Engineering Federation, which represents makers of machine tools and other machinery, said Tuesday that sales to Russia fell 20 percent from January through May compared with a year earlier.
“Merely the threat of sanctions has led to German machinery makers missing out on contracts,” the organization said in a statement that spoke of “longtime supplier relationships and mutual trust” being destroyed.“Merely the threat of sanctions has led to German machinery makers missing out on contracts,” the organization said in a statement that spoke of “longtime supplier relationships and mutual trust” being destroyed.
Officials in Brussels argued that measures being prepared at a meeting of European ambassadors would straddle a delicate line. “My assessment is that this package strikes the right balance,” said Herman Van Rompuy, the head of the European Council made up of Europe’s 28 political leaders, according to news reports. “It should have a strong impact on Russia’s economy while keeping a moderate effect on E.U. economies.” Officials in Brussels said that the new sanctions walked a fine line, aiming to make a strong impact on Russia with only a moderate effect on Europe. “My assessment is that this package strikes the right balance,” Herman Van Rompuy, the head of the European Council, told reporters before the ambassadors adopted the package on Tuesday.
The package to be finalized Tuesday is designed to match and in some cases exceed measures taken by Mr. Obama this month to block access to medium- and long-term American capital markets for some of Russia’s largest and most global banking and energy companies. The measures would also go beyond earlier European asset freezes and travel restrictions imposed on individuals believed to be shaping events in Ukraine.
The newest European plan foresees the imposition of similar capital-market restrictions on Russian state-owned banks; an embargo on future sales of arms; and restriction on so-called dual-use equipment with both civilian and military purposes, according to officials briefed on the discussions. The Europeans are also considering limits on technology sales to Russia’s oil industry.
Those measures would be followed by new American action against more Russian banks, designed to close an economic net around the Russian economy.
Ambassadors from the European Union member states began their meeting at the Justus Lipsius building in Brussels, where their deliberations were expected to run into late evening on Tuesday as the envoys finalize details that will enable them to publish the names of some Russian oligarchs subject to individual sanctions and to push forward with the broader sanctions agreed upon with the United States.
At a meeting on Monday, the ambassadors reached a preliminary agreement on the names of oligarchs to be subjected to asset freezes and travel bans. Those measures, aimed at Mr. Putin’s inner circle, could go into force as soon as late Wednesday.
As for the separate sanctions that would touch broad sectors of the Russian economy, the ambassadors must first agree on the final text during their meeting Tuesday. The ambassadors also must agree on a date for when sanctions should begin and allow time for the European Parliament to be consulted.
During their deliberations on Tuesday, ambassadors may also take time to agree on a process to scale up, or scale down, the sanctions, depending on how events unfold in Ukraine.
The ambassadors could also agree to postpone when the sanctions — both on the oligarchs and on broad swaths of the economy — go into effect to give Russia another chance to change policy on Ukraine. But the expectation among European Union officials was that the governments would agree to put the sanctions into effect as soon as possible by sending them for publication in the Union’s Official Journal in the coming days.