The Dilemma of EU Sanctions on Russia

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Alexander Stanchev


The issue of EU sanctions against Moscow is widely discussed in Russia, but this is not the case in most European countries. It seems that the Ukrainian conflict has been going down on the bloc’s agenda ever since the issue of extremism came to dominate it. A simple look at the headlines of major European papers shows how security problems prevail over all other foreign policy issues.

In the face of the extremist threat the last thing EU states want is instability at the Union’s eastern border. For over a year now France and Germany have been involved in an effort to bring ceasefire to Eastern Ukraine, which in their view is a pre-requisite for a peaceful political solution of the crisis. The EU has made it clear that it does not want another war zone in its neighborhood.

Given the fact that the current round of EU sanctions expires on January 31, 2016, this year promises to be quite challenging for Moscow with regards to the implementation of the Minsk agreement. As for the EU, it now finds it difficult to speak with one voice, which Russia is certainly going to make use of.

The EU claims that the sanctions are not aimed at the Russian population but that they aim at changing the Russian policy towards Ukraine. Then comes the question what does the EU want to change in Russian policy and, not less importantly, what does it consider as realistic to ask for? Crimea is a topic everybody but Poland, the Baltic States and to some extent the U.K. prefer to ignore. Kiev is well aware of this and the recent disruption in electricity supply to Crimea seems to be an attempt to bring the EU’s attention to it. The EU political elite is fully aware that any attempt to try and persuade Russia to return Crimea to Ukraine will result in a failure because for the Kremlin this means not only losing face, but rather a political suicide for the Russian elite.

On the other hand, the Kremlin seems to be much more cooperative on the Donbass issue. The goals Brussels and Moscow pursue in Ukraine might be diametrically opposed, but Russia is not less interested than the EU in the de-escalation in Lugansk and Donetsk for its own reasons. Moscow has never officially recognized the self-proclaimed republics. If it had done so, this would have meant not only greater disputes with the West, but also taking the responsibility for the recovery of a devastated area the cost of which is yet to be calculated. At the same time taking the responsibility for restoring the infrastructure in Donbass would bring limited benefits to Moscow. Russia needs Lugansk and Donetsk as parts of Ukraine, with some special rights guaranteed to them and perhaps under special protection of Moscow. Thus, Lugansk and Donetsk regions are much more valuable for the Kremlin as a lever against Ukraine.

The Russians also know how fragile the Ukrainian government is. The de-facto default on the Ukrainian debt, a deplorable state of the economy, oligarchs still out of control, flourishing corruption, violent scenes from the Ukrainian parliament, a conflict between Prime Minister Yatsenyuk and President Poroshenko, disputes between Minister of the Interior Avakov and Governor of Odessa Oblast Saakashvili – all this describes the political reality in a country everybody in the EU had so much hopes for only a year ago. The Kremlin is counting on the failure of the Ukrainian political elite, thus proving to the West how right Russia was in the first place. Moscow, however, does not want a failed state as a neighbor, it only needs to see the Maidan politicians failing the way Saakashvili did in Georgia. His successors in Tbilisi might not be very friendly towards Moscow, but they are not antagonistic either, thus creating space for dialogue.

Hence, Russia is expected to show some good will and countries like France, Germany, Italy, Austria and Luxembourg will give some discrete (hardly visible to the public) signs they are ready to cooperate with Russia. More precisely, they are ready to discuss the lifting of economic sanctions given the implementation of the Minsk agreement. German Chancellor Angela Merkel declared the sanctions against Russia should be upheld until all parties to the conflict fulfill the Minsk agreement. This stance comes just days after Italy first raised the question that the sanctions need to be discussed even if they are going to be extended. There are grounds to believe that some “old EU member states” start playing a double game.

Italy and Germany are among the EU economies suffering the most from the sanctions imposed on Russia in spring 2014. European “hawks” tend to say, “We might suffer from the sanctions, but the Russians will suffer even more,” thus implying the embargo is a sacrifice worth making if the EU wants to force the Kremlin to influence rebels in Eastern Ukraine. Berlin and Rome can hardly accept this line of thought, especially taking into account the above-listed problems the entire EU is now facing.

In addition, European business does not necessarily put politics above their economic interests. European companies feel uncomfortable with the ongoing confrontation between the EU and Russia and find ways to deliver this message to high-ranking politicians. In mid-June 2015, Newsweek concluded that sanctions cost the EU 100 billion Euros – a loss in profit that is hard to ignore at a time of crisis. Companies from Western Europe are not ready to lose money because some EU member states are historically wary of their mighty neighbor. On the other side, proponents of sanctions understand that Ukraine is no longer a priority on the European agenda. That makes them more vocal, not least because they are afraid of losing the momentum in coercing Russia.

Yet, it is not so easy to put an end to the sanctions in one go as the European leaders risk to lose face especially given the fact that these leaders imposed sanctions in the first place. The EU mainly insists on three points when it comes to Russia’s role in Eastern Ukraine. First, local elections need to take place in Lugansk and Donetsk regions. Second, all military equipment needs to be pulled out of Ukraine. Third, Kiev should regain control over its border with Russia in both rebel-controlled regions.

Many in the EU are eager to launch the rapprochement with Russia, but they are aware they cannot say it out loud and they are convinced both sides should contribute to the rapprochement. Hence, Russia is expected to influence the commanders in Lugansk and Donetsk for them to hold local elections since the two regions did not participate in elections held in the rest of Ukraine on October 25. Instead, they decided to postpone them till spring and not to hold them under the Ukrainian constitution. Kiev claims this would equate to a de-facto secession – a clear breach of the Minsk agreement – and the EU supports this view. Under these circumstances, Russia is the one who is expected to make the compromise.

Italy was the first one to break the taboo and cautiously raised the question on how to go ahead with the sanctions. Other states, such as Poland, are outraged by this step, but major financial and economic interests are at stake. Rome says that the issue of sanctions is extremely important and should be discussed at the level higher than that of the Council of Permanent Representatives (Ambassadors of EU member states). However, Rome never said that sanctions should be withdrawn. Italy as well as other influential EU members are building a “corridor” in the overall EU policy towards Russia that could be employed in the mid-term future. They hope that they will be able to benefit from this gesture later in terms of contracts and investments in Russia as well as through energy supplies at lower prices. If things go according to this plan, including no military conflict in Ukraine, if no further deterioration in EU-Russia relations occurs and if Kremlin remains cold-blooded when it comes to provocations from some actors in Kiev, it can hope for better days for its economy.

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