EU sanctions against Russia locked and loaded, could enter into force shortly

European Commission President Ursula von der Leyen said late on Tuesday that they will "quickly finalise the sanctions package" against Russia after Moscow's decision to recognise the Ukrainian regions of Donetsk and Luhansk, a move labelled as "illegal and completely unacceptable" by the EU and world leaders.

Von der Leyen said this solid package contains a number of calibrated measures, and that "it is a clear response to these violations of international law by the Kremlin."

“Our world is facing the biggest global peace and security crisis in recent years – certainly in my tenure as Secretary-General,” said United Nations Secretary-General António Guterres at a media stakeout on Tuesday.

The sanctions

• directly target individuals and companies involved in these actions
• target banks that finance the Russian military apparatus and contribute to the destabilisation of Ukraine;
• implement a ban on trade between the two breakaway regions and the EU (as the EU had done after the illegal annexation of Crimea in 2014);
• limit the Russian government´s ability to raise capital on the EU's financial markets.

We will make it as difficult as possible for the Kremlin to pursue its aggressive policies,

said von der Leyen.

Politico has learned further details about the sanctions package. It is clear from the measures that overall this is not yet a very tough package in economic terms, but the door has been left open that if Russian actions escalate, sanctions will also be stepped up.

The EU will target …

1. Individuals linked to Putin’s regime, including the 351 Russian parliamentarians who voted in favor of recognizing the breakaway regions as independent, as well as the 11 lawmakers who proposed the initiative.  As EU foreign affairs chief Josep Borrell said in a tweet that was alas deleted, that means “No more shopping in Milano, partying in Saint Tropez, diamonds in Antwerp.”

2. The breakaway regions. The EU will “ban” trade with Donetsk and Luhansk, as European Commission President Ursula von der Leyen announced. The U.S. announced a similar step, but considering it only accounts for 4 percent of Russian exports compared to the EU’s almost 50 percent, it’s clear Europe will have to bear the brunt of any trade restrictions.

3. Russian banks linked to the regime and the military. While no names have been made public, three officials tell Playbook and POLITICO’s Jacopo Barigazzi that VEB — formerly known as Vnesheconombank — is one of them. VEB is already on the U.S. sanctions list. 

4. Russian sovereign bonds. Two diplomats said this included shorter maturity bonds that had so far been exempt from sanctions. The U.S. specified it would also ban U.S. financial entities from trading with Russian bonds on the secondary market.

5. Nord Stream 2: Allies welcomed German Chancellor Olaf Scholz’s clear decision to stop the authorization of the gas pipeline, and seemed surprised by the speed of Berlin’s action. Ukraine’s Foreign Minister Dmytro Kuleba tweeted it was a “morally, politically and practically correct step.” Scholz, it seems, may not be a man of words, but at least in this case he’s a man of action. 

Overall, it seems that the EU sanctions package is similar to the US and UK packages, but obviously the devil is in the detail. However, it is already clear that neither of these is a serious package of economic and financial sanctions, but rather the first in a series of sanctions.

Reuters also said the impact of the new sanctions on banks and on bond trading is likely to be minimal. Western governments - for now - are preferring to keep the much larger sanctions packages that they have planned in reserve should the crisis escalate.

Cover photo: Getty Images