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2014-07-28 18:25:00

EU & RUSSIA: TOUGH CURBS

EU & RUSSIA: TOUGH CURBS

Two of the EU's most senior figures have urged the bloc's prime ministers to approve a sweeping set of new sanctions against Russia next week.

The move marks the clearest signal to date that Europe is prepared to change its cautious approach towards the Kremlin over the Ukraine crisis.

In a letter sent late on Friday to Europe's prime ministers, Herman Van Rompuy, the European Council president, said the sanctions package – which is directed at Russia's financial, energy and defence industries – "strikes the right balance".

He urged national leaders to give their ambassadors the authority to approve the measures on Tuesday.

In a sign of how quickly the measures are moving towards possible approval, the European Commission sent the legal text of the agreement reached by EU ambassadors to national capitals on Friday night.

"I believe that this is an effective, well-targeted and balanced approach, providing the flexibility to adjust our reaction to changes on the ground," said José Manuel Barroso, the commission president.

Both Mr Barroso and Mr Van Rompuy have kept in close contact with national capitals. Their endorsement is a clear sign they have the backing of London, Paris and Berlin.

According to officials who have seen the legislation, it closely follows a 10-page options paper distributed to diplomats earlier in the week , which would ban Europeans from participating in the sale of new stocks or bonds of large Russian state-owned banks. Government-owned banks account for most of the Russian financial sector.

It would also bar exports of high-tech equipment needed by Russian energy companies for deep-sea drilling, Arctic exploration or shale oil projects, and impose an embargo on all weapons and "dual use" goods sought by the military.

According to Mr Van Rompuy's letter, the sanctions would not apply retroactively, meaning the arms embargo would not hit the €1.2bn French contract to sell two Mistral-class helicopter attack ships to the Russian navy. Existing stocks and bonds sold by the Russian banks would not be affected either.

The letter says the energy sanctions are limited to the Russian oil sector, and not the gas industry, "in view of the need to preserve EU energy security".

Despite the limits, the sanctions would be the most sweeping to date by either the EU or the US against the Kremlin.

Previous sanctions have targeted individuals for asset freezes and travel bans as well as a handful of "entities" such as banks and energy companies.

The new measures would move to "phase three" of the EU's sanctions plan by hitting entire sectors of Russia's economy.

"My assessment is that this package strikes the right balance when it comes to cost/benefit ratio and scalability/reversibility over time," wrote Mr Van Rompuy. "It should have a strong impact on Russia's economy while keeping a moderate effect on EU economies."

After two days of negotiations hammering out a deal on the package, EU ambassadors are due to reconvene on Monday evening, where they are expected to add several "cronies" of President Vladimir Putin to the 87 Russian individuals and entities already on the sanctions list.

Under the plan, the ambassadors would meet again Tuesday to address the "phase three" legislation. Some countries have called for an EU summit be convened to approve the measures, but Mr Van Rompuy's letter makes clear he would prefer ambassadors to be empowered to sign off on them.

"I would like to ask you that you instruct your ambassador to complete an agreement by [Tuesday]," said Mr Van Rompuy.

ft.com

Tags: EU, RUSSIA, UKRAINE, US