World, Economics

 New EU Sanctions may Deprive the Kremlin of $300 Billion from its Annual Budget of $ 420 Billion - the European Commission Forecasts

Even before the MH17 disaster, EU countries were discussing a potential ban on Russian oil and gas imports if worst comes to worst.

A text,drafted by the European Commission in late April, outlines what theEU is calling its "stage three" sanctions.

It is entitled: "Assessment of the potentialimpact of restrictive measures towards Russia on the economy of theEU and its member states".

Censor.NET reports that a two-pagesegment of the paper, seen by EUobserver, describesthree options.


The first, a "low-intensity" scenario, containsseven steps.

They include: "restrictions" on imports ofRussian "luxury goods (diamonds, precious metals, furs, vodka andcaviar) and of food products"; restrictions on "selected …intermediate and processed goods (fertilisers, chemicals, tyres,vessels" but not "steel or nuclear components"; restrictions on"imports and exports of arms"; and restrictions to "exportfinancing" for the listed industries.

They also include: blacklisting more Russianindividuals and some companies; suspending EU grants for Russiaprojects; and stopping loans from the European InvestmentBank.

The latter three measures were agreed by EUcountries last week before MH17, in what some diplomats at the timecalled "stage 2.9 sanctions".

The additional names on the blacklist are to bepublished by the end of the month.


The "medium-intensity" scenario designates eightmore steps.

They are: a ban on imports of all intermediateand processed goods; a ban on imports/exports of "all sensitivetechnologies and dual use and arms"; blacklisting still moreRussian individuals; "restrictions" on "trade and investment andrelated financial services"; restrictions on "free movement ofcapital"; restrictions on "maritime and road transport (not airtransport)"; "holding up Russian investment/acquisition in theenergy sector"; an "import ban on coal (no ban on electricity)";and "cancellation of all co-operationactivities".

While France's plan to deliver a "Mistral"warship to Russia in October has attracted attention, the ban on"dual use" items could hurt more.

According to Igor Sutyagin, a Russia specialistat the Rusi think tank in London, France makes gun sights forRussia's leading tank, the T90, while European firms Thales andEads make components for Russian spy satellites.

Read also: Senators Urge Obama to Place the DPR on Terrorism Blacklist andStiffen Sanctions against Russia

According to IHS Jane's Defence Weekly, aBritish consulting firm, France also sells avionics for Russian MiGjets and "electro-optic infrared" technology, used in surveillanceand targetting, for Russian tanks andhelicopters.

Also before MH17, the EU already hit Russianenergy sector investments by forcing Bulgaria to halt constructionof the South Stream gas pipeline.

Following MH17, the EU on Tuesday (22 July)threatened to impose sanctions on "capital markets, defence, dualuse goods and sensitive technology including in the energy sector"unless Russia stops destabilising Ukraine and lets internationalair crash investigators do their work.


The commission's "high-intensity" optioncontains five steps.

Itcalls for: "capital market restrictions"; "prohibition of newinvestment in Russia"; "strict application of EU regulatory rulesto Russian assets in EU companies"; an "import ban on gas"; and "animport ban on oil".

Putting the oil and gas ban in perspective,according to US figures the EU buys 84 percent of Russian oilexports and 76 percent of its gas exports.

A back-of-the-envelope calculation indicates anEU ban would make a $300 billion hole in Russia's $420 billionannual budget.

Read also: EU to Debate Tier Three Sanctions against Russia - Capital MarketAccess and Limits on Sensitive Technologies

With some large EU countries, including Germany,Italy, and Poland, dependent on Russian gas for at least one thirdof their needs, it would also shock the Europeaneconomy.

The commission paper says EU officials carriedout macro-economic impact assessments for each member state. Theresults were sent in a "country fiche" to eachcapital.

Much is likely to have changed since the textwas drafted in April.

The paper notes that the sanctions proposals arebeing "tested" vis-a-vis member states' feedback, so that theoptions text is, at any given time, a "work inprogress".

There is also likely to be devil in thedetail.

When the US imposed economic sanctions on Russialast week, it put a trade ban and asset freeze on eight Russianarms firms.

But it imposed a ban-lite on four Russian energyfirms and banks, which prohibits only the issuing of long-term debt(90-day or longer bonds) to the companiesconcerned.

An EU official told this website some Russiaarms ban options target only new export licences, allowing Franceto deliver its Mistral.

One sign the EU is getting serious came at lastweek's summit, however.

From bark to bite?

In an aside, commission chief Jose ManuelBarroso told press his energy department is doing "stress-tests" onhow EU states could cope without Russian gas, with results due inOctober.

A US source who helped prepare the Americansanctions told EUobserver that Washington is planning to gofurther.

"These [the US sanctions so far] seem moredesigned to quiet critics than inflict real damage. Even so, we'refirmly on the pressure track and will see further escalation.August looms and Russia will be about the business of establishingfacts on the ground [in Ukraine] before we take another whack", thecontact said.

Western bans on Russian financial and energysectors, if imposed, would put Russia somewhere between North Koreaand Iran in terms of pariah status.

Russianleader Vladimir Putin is wooing non-aligned states to hedge hisbets.

But with dozens of MH17 victims coming fromIndonesia, Malaysia, and the Philippines, Asia might be lesswilling to roll out the red carpet.

Read also: Obama Discusses Potential New Russia Sanctions with Merkel andCameron

For its part, the Ukrainian embassy to the EU,in a letter sent to the EU foreign service on Monday and seen bythis website, added ideas on how to increase the politicalpain.

It said Italy should uninvite Putin to a summitof Asian and European countries in Milan inOctober.

It said the EU should encourage Australia, whichalso lost people in the air crash, to uninvite him to a G20 summitin November.

It noted that the "Donetsk People's Republic"and "Luhansk People's Republic" - the Russia-controlled breakawayentities in east Ukraine - should be listed by the EU as "terroristorganisations".

It also recommended an EU "reconsideration ofRussia's right to hold the next Fifa world cup in2018".

Источник: https://en.censor.net.ua/n295042