Monday

4th Jul 2022

EU states agree six-month Russia sanctions

  • Christmas in Moscow. 'The purchasing power of Russian consumers is in continuous decline,' Raiffeisen bank said (Photo: Alex F)

EU states’ ambassadors in Brussels on Friday (18 December) agreed to extend Russia economic sanctions for six months, despite an earlier obstruction by Italy.

EU capitals will ratify the decision by written procedure on Monday. The act will become legally binding the next day, when it's published in the bloc's Official Journal.

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Ambassadors agreed the point without discussion shortly after an EU summit, in which Italian PM Matteo Renzi briefly raised the subject.

He “only mentioned it indirectly when talking about South & Nord Stream [gas pipelines] and Russia,” one EU source said. There was a “limited” discussion on sanctions, but “mostly” on the pipelines, a second source said.

Renzi, ten days ago, had caused consternation when he blocked ambassadors from taking the decision, saying he wants a summit-level debate. His foreign minister said it's time to explore “dialogue” with Moscow.

A third EU source said Renzi might have blocked it to create a buzz around his complaint on Nord Stream II.

The European Commission has blocked South Stream, a Russia-Italy pipeline, on legal grounds. But Nord Stream II, a Russia-Germany pipeline, is moving ahead.

The EU economic sanctions were imposed in the wake of the MH17 air disaster in Ukraine last year. They target Russian banks, energy firms, and arms producers, by imposing curbs on international credit and on technology transfers.

Other EU measures - visa bans and asset freezes on Russian officials and a business ban on Crimea - also remain in force.

The EU has tied economic sanctions to Russia’s compliance with the "Minsk" ceasefire accord, which says “foreign” troops must leave Ukraine and Ukraine must get back control of its border.

The Russian leader, Vladimir Putin, in a TV press conference on Thursday, came close to admitting, for the first time, that Russia conducts military operations in east Ukraine.

“We’ve never said there are no people there who deal with certain matters, including in the military area, but this does not mean that regular Russian [regular] troops are present there. Feel the difference,” he said.

He had already admitted to military operations in Crimea, the Ukrainian peninsula he annexed last year.

Putin also devoted a segment of his TV show to saying an EU-Ukraine free trade pact, which enters into life in January, will harm Russian manufacturers.

For its part, Austria’s Raiffeisen bank, one of the most active Western lenders in the former Soviet region, said on Friday the EU sanctions, amid low oil prices and “structural weaknesses” in the Russian economy, are taking their toll.

It noted, on the eve of the Christmas season, that “with a significantly weaker rouble, elevated inflation levels and real wage losses, the purchasing power of Russian consumers is in continuous decline.”

The Austrian bank added: “We see the Russian economy in 2016 in stagnation after an almost 4 percent slump of GDP in 2015. We expect consumption and investment still to contract in 2016.”

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