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EU sanctions on Russia extended again

By Katarzyna Mirecka

At the EU summit held on December 15th, 2016, the EU leaders agreed to extend the economic sanctions on Russia until mid-2017 over its annexation of Crimea and continued meddling in eastern Ukraine, an ongoing conflict that has cost the lives of nearly 10,000 people. This prolongation, the fifth such time the sanctions have been renewed, comes as the requirements of the Minsk peace deal remain unfulfilled (indeed, in many ways, are actively disregarded by Russia and its proxies).

As was to be expected, EU leaders remain divided over the issue, and the decision reached was a hard-won compromise. Some of the Member States, like Italy, Greece, and Hungary opposed sanctions; others, like Germany, France, Poland, and Lithuania, do back them. Nevertheless, in the words of the President of the European Council Donald Tusk, although “some (…) colleagues” would prefer a longer, 12-month-long extension to exert even more pressure on Kremlin, a 6-month deal is the only one that can be maintained under the current format.

At the same time, additional sanctions were discussed in relation to the Russia’s military engagement in Syria, believed to be behind the escalating humanitarian crisis in Aleppo. Although no binding decision has been reached, it has been underlined that the option is on the table. For the time being, the Prime Minister of Luxembourg called for “providing aid in the most practical way possible”.

The restrictive measures the EU did manage to agree on thus far concern 146 Russian and Ukrainian officials (assets freezes and travel bans) and 37 companies (assets freezes), as well as ban on exchanges in the financial, energy, and defense sectors. With EU being Russia’s main export and import partner, sanctions had an impact, albeit admittedly a rather limited one. Without the global oil-price collapse that resulted in plummeting ruble and general slowdown of the Russian economy, it is anybody’s guess how strong they would be felt by the Kremlin.

With a new deal that has recently been concluded between OPEC and Russia the situation complicates even further, as the agreement carries a real potential to boost the Russian economy through higher oil prices. Granted, for that to happen both OPEC and Russia need to stick to their promises, which proved tricky in the past. Trust has been broken down within the OPEC more than once since its establishment. The EU should not take chances, though. If it wants the sanctions to work at all, the Member States need to stick together, speak in one voice, and be prepared to face tradeoffs.

CASE — Center for Social and Economic Research is an independent, non-profit economic and public policy research institution, established in 1991 in Warsaw.

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