EU sanctions on Russia could self-harm

July 30, 2014 08:36 pm | Updated December 04, 2021 11:27 pm IST - London

The impact of the new and most comprehensive sanctions package so far against Russia, which the European Union (EU) announced on July 29 will do some self-damage, but the burden of that should be equally shared amongst European economies, Foreign Secretary Phillip Hammond said.

“It will affect our economy... but you can't make an omelette without breaking eggs, and if we want to impose economic pain on Russia in order to try to encourage it to behave properly in eastern Ukraine and to give access to the crash site, then we have to be prepared to take these measures,” he said in an interview to a news channel.

Though the sanctions package is designed to punish Russia more than it hurts Europe, it would be “absurd to suggest we can impose wide-ranging sanctions on the Russian economy without also having some impact on ourselves,” he said.

"So our discussions last week focused on a package, which shares the burden fairly across the EU, making sure that the big economies share the pain.”

The raft of sanctions was announced on Tuesday by the EU after a marathon discussion.

In their statement, the 28 member-nations said, “It is meant as a strong warning: illegal annexation of territory and deliberate destabilisation of a neighbouring sovereign country cannot be accepted in 21st century Europe. Furthermore, when the violence created spirals out of control and leads to the killing of almost 300 innocent civilians in their flight from the Netherlands to Malaysia, the situation requires urgent and determined response.”

The sanctions, which will be reviewed in October, target specific sectors of the Russian economy. According to the statement, the sanctions will “limit access to EU capital markets for Russian state-owned financial institutions, impose an embargo on trade in arms, establish an export ban for dual use goods for military end-users, and curtail Russian access to sensitive technologies particularly in the field of the oil sector.”

The EU had only last week put another 15 Russian individuals and 18 entities to asset freezes and visa bans on their list for “undermining Ukrainian territorial integrity and sovereignty.”

The names included those of the heads of the Federal Security Service (FSB) and foreign intelligence, the president of Chechnya, as well as two Crimean energy firms. The list of targets is now 87.

Germany’s endorsement tilted the balance in favour of going for the higher level of sanctions. As the strongest EU economy, and the country with the biggest trade ties with Russia, its backing was crucial. In a statement, German Chancellor Angela Merkel said that the sanctions were “inevitable.”

“It’s now up to the Russian leadership to decide if it wants to follow the path of de-escalation and cooperation.”

The sanctions will not apply retroactively, but will take effect only for future transactions. Thus, the concerns of at least one nation, France, will be addressed as the curbs on arms sale will not stop its sale of two Mistral helicopter carrier warships to Russia under a contract signed in 2011.

A Bill in the Russian Parliament that proposes retaliatory sanctions has been proposed by a group of parliamentarians led by Evgeny Fyodoro, RT.com reported.

The report quotes from an interview given by Mr. Fyodoro to the Russian daily Izvestia . The Bill will allow the government to prepare lists of ‘aggressor nations’ – countries where authorities introduce sanctions against Russia, its citizens or companies.

Their citizens will then lose the right to register a company in Russia, deliver legal services, consultancies and audits.

The list of companies would include all six major US auditing and consulting companies that work in Russia – Deloitte, KPMG, Ernst and Young, Price Waterhouse Coopers, Boston Consulting and McKinsey.

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