The western powers presented a united front over the Ukrainian crisis on Tuesday when the EU and the US agreed to their toughest sanctionsagainst Russia since the end of the cold war.
The EU announcement of sweeping measures intended to cripple the Russian economy and convince the Kremlin to abandon itssupport for separatists in Ukrainewas quickly followed by a new round of similar US penalties. The 28 EU members decided on new restrictions, which targetRussia’s financial, energy and defence sectors. These newest EU measures represent a major escalation in European pressure on Moscow, include a measure that wouldprevent Russia’s largest state-owned banksfrom issuing stock or bonds in European markets, according to EU diplomats.
Announcing parallel US penalties on Russia only a few
hours later, President Barack Obama said the tough approach was not a new cold
war but reflected "Russia’s unwillingness to recognise that Ukraine can chart
its own path”, adding that the close co-ordination between the US and Europe
meant that the sanctions would have "an even bigger bite”. Previous sanctions
had already "made a weak Russian economy even weaker,” he said.
Despite intense pressure from the Obama
administration, the US and EU had seemed only weeks ago to be far apart on the
action they were prepared to take against Russia, notes the "Financial Times”.
Those differences have narrowed sharply since the crash two weeks ago offlight
MH17, which the US has blamed on pro-Russian separatists.
The EU measures will bar exports aimed at modernising
Russia’s oil industry and impose a blanket arms embargo that includes a
carveout allowing existing contracts – including a €1.2bn French deal to sell
helicopter attack ships to the Russian navy – to go forward. Details of the
sanctions are expected to be published by Thursday night, when the measures are
due to go into effect.
"The package of new restrictive measures agreed today
by the EU constitutes a powerful signal to the leaders of the Russian
Federation: destabilising Ukraine, or any other eastern European neighbouring
state, will bring heavy costs to its economy,” EU leaders said in a statement.
"Russia will find itself increasingly isolated by its own actions.”
The statement added that the EU was ready to repeal the sanctions if the Kremlin "starts contributing actively and without ambiguities to finding a solution to the Ukrainian crisis”.
The Obama administration said it had added three large state-owned banks –Bank of Moscow, Russian Agricultural Bank andVTB Bank– to its sanctions list, as well as United Shipbuilding Corporation, which builds ships for the navy.
Like the EU, the US is barring technology transfers in several parts of the energy sector, including shale gas and deep-sea and Arctic oil exploration.
Even before the measures were enacted, European companies started to warn of a severe impact on their operations in Russia.BP, the UK oil major which owns nearly a fifth ofRosneft, the oil group that is majority held by the Russian government, said on Tuesdayits profits could be hit by sanctions.
Rosneft is already on the US blacklist, as isits chief executive Igor Sechin, but until now it has not been targeted by the EU. Mr Sechin admitted for the first time on Tuesday that the sanctions were likely to affect Rosneft’s strategic plans, suggesting the company may need to push back certain projects.
Bob Dudley, BP’s chief executive, said it was too early to assess the impact tightening sanctions might have on thecompany’s long-term ability to make money from its Rosneft stake.
But he said the downing of Malaysia Airlines flight MH17 had altered the nature of doing business in Russia. "Sometimes events occur that are unintended and change the course of history; this was one such event,” he said at a results presentation in London.
The FT report stresses that it is due to concerns of Russian retaliation that exports to the Russian gas industry were not included in the EU’s energy sanctions, as a majority of EU members rely on Russian gas for a large portion of their energy needs.
