The European Union joined calls on Monday for Russia not to annex or recognize breakaway Ukrainian regions, threatening to impose sanctions should Moscow do so. Putin ignored the warnings and signed a decree recognizing the independence of two separatist regions of Ukraine, the Donetsk People’s Republic and Luhansk People’s Republic, and ordered troops to the areas, saying they will “maintain peace.”
The US now expects Russian troops to move into the Donbas region of Ukraine as soon as Monday evening or Tuesday, a senior US official familiar with latest the intelligence tells CNN.
Ukraine is not just a neighbor. It is an inherent part of our own history, culture, and spiritual space.
Mr. Putin said on a television address late Monday.
“If there is annexation, there will be sanctions, and if there is recognition, I will put the sanctions on the table and the ministers will decide,” the EU’s foreign policy chief Josep Borrell said after a meeting of EU foreign ministers.
It is not an easy task, however, because each EU Member States have different interests and views on how to deal with Moscow.
Putin, the recidivist
It is not the first time that Russia violates International Law and international sanctions have been imposed during the Russo-Ukrainian War by a large number of countries against Russia and Crimea following the Russian invasion of Ukraine, which began in late February 2014. The sanctions were imposed by the United States, the European Union (EU) and other countries and international organizations against individuals, businesses and officials from Russia and Ukraine. Russia responded with sanctions against a number of countries, including a total ban on food imports from Australia, Canada, Norway, the United States and the European Union.
The sanctions by the European Union and United States continue to be in effect as of February 2022. In January 2022, the EU announced the latest extension of sanctions until 31 July 2022. In fact, those sanctions contributed to the collapse of the Russian ruble and the Russian financial crisis. But they also caused economic damage to a number of EU countries, with total losses estimated at €100 billion (as of 2015). According to Ukrainian officials, the sanctions forced Russia to change its approach towards Ukraine and undermined the Russian military advances in the region. Representatives of these countries say that they will lift sanctions against Russia only after Moscow fulfils the Minsk II agreements.
Now what?
The European Union must impose sanctions on Russia immediately, the governments of the Baltic states of Estonia, Latvia and Lithuania said after Russia’s announcement.
The penalties could include restrictions on companies and individuals with close ties to the Russian government, as well as measures related to the defense, energy and finance sectors. There are a few options to the Member States, depending on how far they want to go:
- Sanctions on the Russian financial and banking sectors, ranging from sanctions on Russian banks, including asset freezes and limits on transactions, to further limiting Russian access to capital and the international bond markets, and freezing Russia’s access to the IMF’s Special Drawing Rights, to the most severe measure of excluding Russia from SWIFT.Banning Russia from SWIFT is an item being discussed at length by Member States, even more so as the European Central Bank has asked banks to consider how they would handle different risk scenarios related to SWIFT. It has also requested banks to share details of their own assessments and contingency plans. While the EU has some experience to draw on, as Iran was banned from SWIFT in 2012, the Council could not reach unanimity when considering whether to ban Russia from SWIFT in 2014 when Russia annexed Crimea. In this regard, we understand that some Member States, including Germany, have expressed opposition to the idea of cutting Russia off from SWIFT, and this option is likely to only be used as a last resort.
- Trade restrictions, ranging from severely tightened export controls on vital technologies, to the indefinite suspension of the Nord Stream 2 pipeline, or to restrictions on energy exports, although the latter remain unlikely. Further measures aimed at limiting future investment in Russian oil and gas exploration are also possible. Similarly, further sanctions on the Russian defense sector and/or Russian state-owned enterprises are also under consideration. While there was much debate over whether to tie Nord Stream 2 to developments at the Ukrainian border with initial opposition by Germany, it is now more likely that the pipeline will be targeted should Russia invade Ukraine, as Germany has signaled that sanctions on Nord Stream 2 are now on the table. This is supported by most EU Member States, the United States and the UK, despite some resistance, such as from Austria, which has a stake in Nord Stream 2 through the Austrian OMV Group, and from Hungary, which has close ties with Russia.
- Individual restrictive measures, such as asset freezes, prohibitions on making funds or economic resources available, and travel bans against individuals close to President Putin, although it appears that the EU is not considering sanctions on the president himself. When drawing up the list of names, the EU will in principle require a connection between the targeted individuals and the developments in Ukraine for them to be sanctioned, especially considering the potential for legal challenges.
[SOURCE: Assessing Potential EU and UK Sanctions Against Russia, Steptoe]
Putin is better prepared to sanctions while the EU tied to Russia
Things have changed since the first Russian invasion in 2014. Russia has now sanction-proofed itself and the Kremlin has pressed oligarchs to bring money home in response to sanctions. Moscow has amassed gold and foreign exchange reserve topping $620bn; has hoarded surplus oil and gas revenues in excess of $190bn and Russia’s debt is just about 20% of GDP.
On the other hand, the EU is divided. “Energy dependency makes a deal more difficult for the EU than for the United States. Getting political agreement is harder,” said a senior EU diplomat. “There’s no free lunch. We have a deep relationship with Russia so there will be economic pain, and for some more than others.” It was not immediately clear which EU countries have been the most hesitant in negotiations or when the bloc might be ready to move on sanctions which it says would have “massive consequences and severe costs”.
U.S. sanctions Russia for declaring independence of eastern Ukraine territories
President Biden already signed an executive order on Monday imposing sanctions on Russia. The order bars “new investment, trade and financing by U.S. persons to, from, or in” the so-called Donetsk People’s Republic and Luhansk People’s Republic, located in Ukraine’s eastern Donbas region, White House press secretary Jen Psaki said in a statement.
The New York Times reports that the plans the United States has discussed with allies in recent days include cutting off Russia’s largest financial institutions from global transactions, imposing an embargo on American-made or American-designed technology needed for defense-related and consumer industries, and arming insurgents in Ukraine who would conduct what would amount to a guerrilla war against a Russian military occupation, if it comes to that. (Source: New York Times)
What is next?
On Wednesday, members of the NATO alliance will meet with Russia in Brussels. The next day in Vienna, Ukrainian officials will also be at the table, for the first time, for talks at the Organization for Security and Cooperation in Europe. But with 57 members, that group is so large that few expect serious negotiations.
Sanctions will likely not dissuade Putin to move forward with his plans for Ukraine. Yes sanctions will hurt Russia but Mr. Putin envisions something bigger: the redrawing of the post-Cold War security map of Europe. Would the West be up to the task? It all depends how much it is ready to sacrifice.
Read more about EU Sanctions against Russia.
