Europe, and then the US, intensified their sanctions against Russia. De facto it is the notorious and long-awaited third package of restrictions, which the West had used to scare the Kremlin for the past few months. It seems the EU realized that the conflict in Donbas has gone too far and it is possible to stop it with joint efforts only.
During the announcement of the new sanctions, the US President Barack Obama noted that Russia isolates itself from the “international community, setting back decades of progress.” “This is not a new Cold War, it is a very specific step, which relates to Russia’s unwillingness to recognize Ukraine’s right to choose its own path,” Obama said.
According to him, new sanctions will make Russia’s already weak economy even weaker. Obama also added that the United States stop exporting specific goods and technologies for Russia’s energy sector. The sanctions also affect Russian banks and defense contractors. BBC reports that this round of sanctions added the following banks to the targeted group: VTB, the Bank of Moscow, and the Russian Agriculture Bank (Rosselkhozbank).
The European Council website says that the new restrictive measures for Russia by the EU will:
- limit access to EU primary and secondary capital markets for Russian state-owned financial institutions;
- impose an embargo on trade in arms;
- establish an export ban for dual use goods for military end users;
- curtail Russian access to certain sensitive technologies that can be used for oil production and exploration.
The message also states that this “reinforces the measures already adopted by the EU since March 2014 on the situation in Ukraine and the illegal annexation of Crimea.”
Besides, the statement indicates the EU is willing to engage in “an open and frank dialog” with the Russian government. Also, Europeans are ready “to reverse their decision on sanctions” when Russia starts contributing actively and without ambiguities to finding a solution to the Ukrainian crisis. According to Reuters, sanctions will be in force for three months, and at the end of this term they can be reviewed.
However, according to German chancellor Angela Merkel, who interrupted her vacation to adopt new sanctions against Russia, the EU can intensify the sanctions even further. Everything depends on Moscow’s further steps, she said. “Now it is up to Russia to choose whether it wants to follow the path of de-escalation and cooperation. We have said many times that illegal annexation of Crimea and destabilization of the situation in the east of Ukraine are unacceptable. This resolution [new round of sanctions. – Ed.] was inevitable,” Merkel added.
In his turn, the president of the European Council Herman Van Rompuy noted that the reinforced round of sanctions is a strong signal for the Kremlin. “Destabilizing Ukraine, or any other Eastern European neighboring state, will bring heavy costs. Russia will find itself increasingly isolated by its own actions,” Rompuy stated.
Ukraine’s Foreign Minister Pavlo Klimkin, who has recently been to the United States on a two-day visit, welcomed new sanctions against Russia. He said in an interview to media that three or four months ago it was hard to imagine that the EU would implement sectoral sanctions against its key trade partner, Russia. “The crucial moment for me here is the positive attitude towards Ukraine, towards a united, democratic, and European Ukraine,” the minister said. At the same time, Klimkin added that his vision of solving the conflict in Donbas includes a “political solution” only.
International department editor at The Economist Edward LUCAS is skeptical about Europe’s new restrictions against the Kremlin. He stated in a commentary to The Day: “These sanctions are not very harsh. They will infuriate Putin, but they will not restrain him. It is too little, too late.”
The Day asked Ukrainian, Russian, and European experts to comment on the reinforcement of the Western sanctions against Russia and eventual consequences.
Lilia SHEVTSOVA, senior associate, Carnegie Moscow Center:
“These sanctions are certainly ‘one small step’ on the part of the EU, which finds unanimous action on any issues very difficult, the more so when it concerns Russia. Most European countries have serious commercial and other relations with it. Nevertheless, these sanctions seem to have been too little, too late. Had they been imposed right after the annexation of Crimea, they might have forced the Kremlin to ponder if the second phase of the expansion, the attempt to create Novorossia, was worth it.
“Now these sanctions arrived at the moment when the Kremlin found itself in a bobsleigh situation. In fact the survival logic of the system and the leader came into play, which does not envisage or allow for any stops. The leader in the bob can change the speed and trajectory of turns, but he cannot change the tracks. Likewise, Putin cannot change the paradigm of survival. Putin’s renunciation of the military and patriotic mobilization, which ensures his survival and huge popularity ratings, would mean a situation in which he would be devoid of the mechanism to govern a peaceful society. To govern a ‘peaceful’ Russia, a leader should meet the society’s interests, give up the steam roller of repression, and so on, and so forth. Putin cannot afford this. Moreover, if he did, he would confuse his national-patriotic base: they see him as the motor of Russian expansion and grandeur. They could not grant him a right to lose, but on the other hand, he cannot bring them victory either. So far Putin’s exit price in this situation is higher than the one Russia and its political elite have to pay for the sanctions. I do not rule out that by the end of the year the situation could change. Nor do I rule out the possibility that Putin will look for a way out. This is not a cul-de-sac yet, this is just gliding down.
“These sanctions are an alarm bell for sane people in Russia. It means that difficulties are to be expected at the end of the year. First of all, in the financial sphere, re-crediting Russian companies. But at the moment the sanctions cannot change the paradigm, they only can force Putin to change his tactics.
“Now much more people are beginning to worry about sanctions compared with April. Nevertheless, the sanctions have not yet affected Russian people’s living standards. At the end of the year the sanctions will overlap the general aggravation of the economic situation, but even then I am not sure to which extent the population will associate it with those restrictions. They are more likely to affect the sentiment of the elite, a part of which has economic and personal ties with the West. The worries are rising now, but in order for this elite to split, and cracks to run across the Kremlin’s walls, people have to take to the streets.
“The sanctions change the quality of the Russian socio-economic status quo, but no one knows when the climax will be reached when the people will really begin to wonder. At the same time, Levada Center surveys show that 37 percent of all questioned Russians place individual interests much higher than those of the state. Therefore, this military and patriotic mobilization, based on the individual’s total submission to the state, does not work for 37 percent of the Russian population. It means that this submission is relative and fragile.”
Nikolay PETROV, political observer, Moscow:
“This rather serious step by the EU, which radically changes the relations between Russia and the West, can prove too harsh and have quite opposite consequences. In the future these sanctions will cut Russia to the quick and force it to consider improving the relations. However, in a situation of escalating confrontation between Russia and the West, the Kremlin could stake everything on escalation in Ukraine as well. He might do it in order to show his Russian subjects that they are surrounded by enemies, must unite around the country’s leadership, and worry not so much about economic losses as about the greatness and preservation of their own country.
“So far the sanctions have not affected Russian citizens, being personal and targeting a few dozen people from Putin’s entourage and the leadership of the self-proclaimed republics.
“What makes the latest phase different is that these sanctions cut Russia’s economy to the quick. Sooner or later they will become quite tangible for rank-and-file Russians. If it could have seemed that they got Crimea for free, and except the demonstration of seriousness of intents and Russia’s grandeur they lose nothing in the ongoing game, later the situation will change.
“Here a question suggests itself: how will the government react? Confrontation rhetoric and ‘besieged fortress’ behavior might turn out quite a logical step for the Kremlin to compensate for economic problems.”
Svante CORNELL, director and cofounder of the Institute for Security and Development Policy (Stockholm):
“The sanctions have come too late. They may have some effect on Russia, but they are not enough.
“This is because Putin has gone too far in his aggression against Ukraine. It will take a lot of effort to stop him, because he has invested a lot in this conflict, and built up his own regime on it. Putin has also cultivated a very dangerous beast in the Novorossian religious nationalism, and that beast needs to be fed.
“To retreat at this stage would be very dangerous for Putin. Many Europeans, including myself, said from the beginning that we should act very firm to prevent the escalation of the conflict. But when the process has become inevitable, it is very difficult to roll back.
“Whenever Russia feels that the West’s stance is fragmented or it feels itself weak, it always imposes its will. On getting a strong and consolidated response from the West, Russia always retreats. We saw this in the past few months: when Russia started to do something, and the West’s response was strong, the Russians went more cautious. With these sanctions, the Russians will be warier.
“If we do not respond to the Russian aggression and the threat that it poses to global security, economic losses for Europe will be far greater in the long run than the limited costs which may have to be born now. The fact that European sanctions against Russia may hit the EU has always been for us a dangerous argument. We must accept that they will actually hit the EU economy, but it cannot be used as an argument against imposing them. The only way to make the Russians think that the West is resolute is by showing that European countries will take economic losses coming with the imposition of sanctions. If the EU wants sanctions that would hurt Russia but spare Europe, it is not taking the matter seriously. When Russia sees that European leaders are taking steps that hurt their own nations, it will make an impression on it.”
Lauras BIELINIS, political analyst (Vilnius):
“These sanctions are really serious, for financial restrictions on its banking industry will be very painful for Russia. The Kremlin will feel the sanctions’ impact now not just through some persons who have been hit selectively, but through the masses as well who will fall on hard times to an extent. I think that the Russian authorities will understand that they have gone too far.
“The Russian regime will try to distance itself further from its aggression in Ukraine, to show that it is not involved, or at least was not the instigator. This is the main theme of all the Russian propaganda activities. On the other hand, it should be understood that the Russian government is finding it very difficult to find a way to retreat. Its main objective now is not gaining influence or dominance on the Ukrainian front, but preserving power inside Russia.
“I think that Russia is using all instruments at its disposal to adequately respond to the EU and all those who criticize its actions or demand a stop to its aggression. However, this is the price of democracy, real and humanly understandable peace. We have to be prepared that Russia will do something to harm our economic activities or certain exports.
“European leaders have already realized that peace and security issues trump economic interests. Otherwise, we will see a protracted aggression and unclear relations between the EU and Russia. If EU leaders have not understood this yet, we will be going through various incidents for a long time, and Ukraine will live in the shadow of aggression for long time. However, principal leaders of the EU are aware that all that Russia does is nothing more than propaganda and aggressive treatment of all its neighbors.”
Semen NOVOPRUDSKY, independent journalist (Moscow):
“The new restrictions have important moral aspect, as Russia was hoping until recently that the US, which is less dependent on the Russian economy, might impose these sanctions, but the EU would not do so as pragmatism, profits, and comfort would take precedence over political considerations.
“These sanctions have psychologically duplicated what the US did, and the fact that the EU decided to go forward with such quasi-sectoral sanctions against major players of the Russian defense industry, as well as against the country’s big banks, testifies to the EU sending a clear signal: economic benefits are secondary for it, and the union believes that they may be sacrificed as political danger from Russia is a greater threat. It is an important symbolic gesture.
“Will it stop Russia? I see a range of options, from further hardening the Kremlin’s attitude to it causing Russia to stop. Internal features show that the Russian leadership is split on the issue. Some people may want to stop it, but the Russian president’s personality makes him consider any concessions a sign of weakness and a loss of face. He is ready to hit back, while the costs of his policies are becoming so great that maybe part of the elite will try to stop him. However, the situation remains unpredictable. The Russian authorities still have no strategy and no idea what to do with Ukraine. Pressure on Russia is growing. Obviously, it is putting itself into a political trap that will be very hard to get out. No one knows how the Russian president will behave inside that trap, because such a sittion is unprecedented in his entire reign. He is gradually coming to face the biggest chalenge and crisis of his reign.
“As for the ordinary Russians’ attitude to sanctions, I am not sure that people are very sincere when talking about it. Economic literacy is low in Russia. Residents of large cities exhibit more anxiety. In addition, the intensity of propaganda is such that people who are at the mercy of their imperial instinct (which has not gone anywhere), and on the other hand trust television as the main media – such people live in the television picture. So far, sanctions have not affected the lives of most people, and they do not really understand the country’s predicament. Later on, when the sanctions will take their toll on jobs and incomes of Russians, propaganda will switch on, blaming the sanctions for falling living standards and claiming that it is the work of the West, and not a consequence of Russian foreign policy. Many Russians are completely disoriented. Not only the Russian leadership, but many ordinary Russians as well, live in this fictional world.”
Borys SOBOLIEV, expert in international trade and finance, former deputy finance minister, now serving as chairman of the board of the Ukrainian Credit-Banking Union:
“Of course, it would be better if such sanctions were imposed from the very beginning, when there was the aggression in Crimea. Even today, they are significantly affecting the Russian economy. A striking example is officials’ statements. The Dozhd TV channel broadcast recently a speech by chairman of Rosneft’s board of directors Aleksandr Nekipyelov who expressly stated the company’s intent to curtail its programs in the Arctic and in other areas where resources of ExxonMobil and other foreign partners were involved. Curtailing these programs is for Russia a harbinger of the fall of proven reserves, which translates, with some lag, to falling exports.
“Secondly, European banks ceasing lending to Russia means a budget shortfall. Over several months, it may hit current expenditure. Putin already seized retirement savings last year to cover current budget financing needs. It is a definite sign of some trouble coming. Recent devaluation of the ruble is notable too. It is not happening out of excessive abundance. Therefore, it is clear that Putin’s cronies will oust him on their own, because he is now harming their interests.
“The sanctions also have a major impact on the state-owned banks and their subsidiaries, including those operating in Ukraine.
“Incidentally, this is directly related to Ukraine. I have long suggested that the National Bank held a special meeting spelling out the sanctions’ consequences for Prominvestbank, Sberbank and other Ukrainian subsidiaries of Russian banks. After all, if these banks start to wind down their activities here, does not someone need to think about ways to pay back people’s credits, deposits and preserve tens of thousands of jobs?
“The Russian aggression is now the strongest in the media industry. To deal with media aggression and war, we need an international convention establishing criminal responsibility for transboundary media aggression. It is Ukraine that should propose such a convention. It will allow us to institute criminal proceedings against Russia in an international court, and bring it to account for every death, for each damaged building. Meanwhile, those who succumbed to the media aggression should be exonerated, because they have been deceived. They are victims and should sue Russia.
“We must establish international criminal penalties for media provocation, aggression and war, provide a definition of it and ask Yurii Serhieiev, Ambassador of Ukraine to the UN, to submit a draft resolution on the adoption of such a convention, with Ukraine as its author.”
