Is it possible for the EU to punish Russia for its advances on Ukraine through sanctions that will not also hurt member states? This is a question keeping diplomats busy. However, these sanctions need to be decided on soon, in case of a Russian incursion.
The EU previously imposed sanctions against Russia following the illegal annexation of Crimea. Russia responded with counter-sanctions, including a total food imports ban.
The sanctions had the desired effect of weakening Russia’s economy. Still, the counter-sanctions also caused damage to several EU countries, especially those specialising in agri-food exports, to the tune of billions of euros.
Sanctioning Russia is not an easy decision, knowing that the EU relies on it for roughly 35% of its gas imports. A minor Russia-Ukraine spat in the winter of 2008-2009 stopped gas flows and left parts of Europe in the cold.
One of the heaviest Western sanctions envisaged is cutting Russia from Belgium-based SWIFT, the messaging system used by 11,000 banks in 200 countries for cross-border payments.
A problem, reportedly raised by Germany, is that Europe would still need to import gas from Russia and pay for it. Even if an alternative payment system is implemented, gas disruption could be very harmful to EU countries.
But if the West drops the SWIFT idea, gas flows would still be impacted. Unless the conflict spirals, supplies of Russian gas via TurkStream are likely to remain unchanged, but the remaining flows across Ukrainian territory would stop.
In the absence of another alternative, that would make it rather difficult to ‘sacrifice’ the Nord Stream 2 pipeline, currently seen as perhaps the hardest-hitting EU sanction.
Western companies ranging from BP and Shell to Exxon have stakes in the Russian oil and gas sector and will be exposed to risks, just as the Western banking and retail sector is active in Russia. Some EU countries are less supportive of sanctions, and this is why Putin is courting their business representatives.
But even in the US, the American Petroleum Institute, the largest US lobbying organisation for oil and gas drillers, asked for sanctions to be targeted to limit potential harm to US competitiveness.
Indirectly, a Russian invasion would inevitably impact oil prices at a time when they are already high, as well as stoke inflation. A blockade of the Black Sea could impact wheat and corn exports from the region and see global food prices soar.
Overall, the economic losses from the expected conflict could outweigh the economic slump from COVID-19, for which the EU has put in place a recovery fund of €750 billion.
To help maintain EU cohesion and make the sanctions and the related hardships sustainable over time, we must assume that the EU will need a similar effort, and direct it at building a more credible Europe in the global context.
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The Roundup
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Look out for…
- Commissioner for Innovation, Research, Culture, Education and Youth Mariya Gabriel participates, via videoconference, in the “EPP Expert Group on Innovation”
- Commissioner for International Partnerships Jutta Urpilainen participates via VTC in Kenya Strategic Dialogue
- Ursula von der Leyen chairs the meeting of the New European Bauhaus High-Level Roundtable
Views are the author’s.
[Edited by Alice Taylor]
Source: euractiv.com
