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The EU member states' foreign affairs ministers warn Russia of "additional and far-reaching consequences"

Any further steps taken by Moscow to destabilise the situation in Ukraine "would lead to additional and far-reaching consequences for relations in a broad range of economic areas," the ministers said after their meeting in Brussels, on 17 March. Meanwhile, Russian President Vladimir Putin signed a treaty to annex the breakaway Ukrainian region of Crimea, and thus he knocked the ball back into the EU's court. During their summit, on 20 March, the Union's leaders will consider new sanctions against Russia in the hope of forcing Putin to the negotiating table as per stage three of the road map they agreed on 6 March. Under this road map, the EU has already suspended talks with Moscow on investment and visa-free travel and imposed an asset freeze and a visa ban on 13 Russian individuals, on 17 March.

The nature and value of these economic sanctions have yet to be defined. The member states are in intense discussions already on ways to share the burden of the eventual sanctions' negative effects. Some member states maintain close economic ties to Russia, with the total volume of bilateral (EU-Russia) trade amounting to 246 billion in 2010. Should the member states fail to take a balanced approach, Russia would likely focus on the weakest links', ie on those states that could potentially break the European consensus.

Reflecting on the ongoing talks, French Foreign Minister Laurent Fabius said, on 18 March on Europe 1 radio, that Paris was ready to suspend a 1.2 billion contract to supply two Mistral-class helicopter carriers to Moscow. He added that other European countries should "do the same with the assets of the Russian oligarchs in London".

For Georg Zachmann, research fellow at Bruegel think tank, "if the [economic[ sanctions the EU can agree upon are not enough to force Putin to de-escalate and enter into talks, it would be better just to remain at the symbolic level" of asset freezes and visa bans. He believes that Europe needs shows that it is "united and determined".

A top official from a member state told Europolitics, on condition of anonymity, that a sizeable reduction of gas imports from Russia is expected to be considered by the EU's leaders.

In Zachmann's view, the EU has one economic weapon against Putin: gas imports. Last year, these imports were worth US$70 billion, which equals 3% of Russia's GDP. Although the suspension of gas imports from Russia would have a significant impact on the Union's economy, the cost, according to Zachmann, "would be manageable," since the loss of Russian gas could be compensated for by other fuels for consumption in the most dependent states (the Baltic states or Bulgaria), and winter is still several months away.

In this context, Daniela Schwarzer, director of the Europe Programme at the German Marshall Fund, thinks that this crisis "could trigger further integration of the European energy market and reduce the dependency on Russian oil and gas".

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Publication:European Report
Geographic Code:4EXRU
Date:Mar 19, 2014

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