Divisions in Europe on sanctions

Divisions in Europe on sanctions mean Russia need not change Ukraine aims

Unless Vladimir Putin miscalculates with a dramatic escalation he has little cause to fear tougher economic measures

Ian Traynor

Capital flight from Russia escalates, the rouble continues a downward spiral, Russian capitalism – witness the Moscow stock exchange – faces hard times. Because of Ukraine. Because the US and Europe are freezing the assets and spoiling the holiday plans of a growing number of wealthy, powerful Russians and Ukrainians identified as cronies ofVladimir Putin or complicit in aggression against Ukraine.

The hope in Washington and European capitals is that Russia's nouveaux riches, seeing part of their fortunes melt away, will turn on the Kremlin and temper Putin's new nationalism. The sanctions are having an effect, the west insists. Putin will be forced to think again.

But Putin put Russia's richest oligarch, Mikhail Khodorkovsky, in jail, and confiscated the assets of Boris Berezovsky and sent him fleeing to London. Loyal oligarchs are rewarded, the disloyal are punished and their wealth expropriated.

It's an old tune in Russia – sacrifice in the name of the national interest – and Putin knows how to whistle. There is little to suggest the two stages of western sanctions against Russia already being implemented will change Putin's ways.

Tier Three sanctions are a different story. For more than a month, the US and Europe have been threatening sectoral sanctions on trade, energy, finance, and military equipment.

William Hague, the foreign secretary, said on Monday that such embargoes remained in "preparation". At the weekend, the leaders of the G7 major economies – the US, the UK, France, Germany, Italy, Japan and Canada – and the presidents of the European council and European commission said that "we continue to prepare to move to broader, co-ordinated sanctions, including sectoral measures should circumstances warrant".

The formula is evasive. The threats are empty. There is no stomach for such moves in Europe because the result would be a devastating trade war that would damage a weak European economy that is only in the early stages of recovery from recession and years of currency and debt crisis.

"It's a little bit like nuclear deterrence," said a senior EU official. "Economic sanctions are best when they are not used."

So the Europeans have come up with a policy of inaction designed to look like action – lots of activity and no decisions. The sanctions are always being "prepared".

The British authorities well know the impact of serious financial sanctions on the City of London, just as Paris is aware of the effect on defence contracts and the Germans are acutely conscious of the costs to their car exporters and energy giants. But they ask the European commission to study the sanctions fallout, to report to the "sherpas" serving prime ministers, presidents, and chancellors, who then come back to the commission with further recommendations aimed at delaying rather than expediting action and decisions.

The Russians know this. Besides, Putin is a risk-taker. Obama, Merkel and Hollande are risk-averse leaders. The Europeans, with 12 times more trade and investment at stake than the Americans and, unlike the US, quite dependent on Siberian energy supplies, resent the pressure from Washington to get tougher.

They are deeply divided, between eastern and western Europe but also within those two camps. The Poles and the three Baltic states are the hawks, while Hungary, Slovakia and Bulgaria are "more understanding" of the Russian position.

In western Europe, Britain tends to the side with the east European hawks, while Berlin is determined not to close off dialogue with the Kremlin. Italy, Spain, Greece and Greek Cyprus are against punishing Russia.

If the sectoral sanctions were imposed, there would be bloodletting within Europe about who was and who was not bearing the burden.

The Russians are skilled at dividing the Europeans. But in this case, they don't need to try very hard.

At Nato headquarters in Brussels, the secretary general, Anders Fogh Rasmussen of Denmark, sounds as though he wants Russia rebranded as an adversary of the west. But across town in the councils of the EU, that view runs into stiff resistance.

Unless Putin blows it with a dramatic escalation in Ukraine, there will be no quantum leap in the sanctions regime.

If the Kremlin's current aim is to wreck Ukraine's elections in four weeks, restrict the writ of the Kiev government and keep the country weak and unstable while ensuring that the west pours billions into Ukraine, he can comfortably ride out the sanctions as foreseen now.

http://www.theguardian.com/world/2014/apr/28/divisions-europe-sanctions-russia-ukraine-vladimir-putin