Moghadam, left, with his deputy director Poul Thomsen during a meeting in Brussels
As the eurozone crisis slowly fades into history, many of its most prominent players are moving on as well. On Wednesday, Reza Moghadam, head of the European department at the International Monetary Fund and arguably the fund’s most influential official during the crisis, announced his departure to take a top job at Morgan Stanley in London.
According to officials close to Moghadam, part of his reason for leaving is because he held several of the IMF’s most senior posts over his 22 year career and now could only move laterally to other director positions. In addition, those who have spoken to him said most of his family – including his mother and adult children – now live in the UK and he was eager to return to Britain after more than two decades in Washington.
“Leaving the fund has not been an easy decision and I go with a heavy heart,” Moghadam said in a statement released by the IMF. “But I look forward to a new chapter in my life and a new career, and to being back home in the UK with my family.”
At Morgan Stanley, Moghadam will be vice chairman of the global capital markets group, where he will continue to deal with public finance issues, including working with governments seeking advice on debt or fiscal issues. Because he’s moving into a private-sector job that overlaps with his current duties, he will give up his IMF responsibilities immediately and won’t begin his job in London until October or November. Read more
A Vienna branch of Sberbank, Russia's largest state-owned bank, which would be covered
Although a large chunk of Brussels officialdom has already cleared out for the summer break, the 28 ambassadors to the EU will be busy this week finalising highly-anticipated sanctions against Russia.
On Monday, they will for the first time be adding “cronies” of Russian president Vladimir Putin to the EU’s sanctions blacklist, and then on Tuesday is the main event: deciding whether to move forward with “phase three” sanctions – measures against entire sectors of the Russian economy rather than just targeting individuals or “entities”.
Over the weekend, national governments reviewed legislation prepared by the European Commission that will be debated during Tuesday’s session. As we reported in today’s dead-tree edition of the FT, we’ve been able to secure a copy of the draft sent to national capitals and have posted relevant excerpts below. Read more
Russian president Vladimir Putin, left, with Van Rompuy at a January summit in Brussels
After weeks of equivocation that made it appear the EU might never move to “phase three” sanctions against Russia – which would target entire sectors of the Russian economy rather than just individuals and “entities” – on Friday things began to move very quickly.
First, EU ambassadors (known as Coreper in euro-speak) tasked the European Commission with drawing up the legislation needed to approve the new sanctions, which would go after the Russian financial, energy and defence sectors. Details of what the sanctions are expected to look like are here.
Then, late on Friday, Herman Van Rompuy, the European Council president, sent a letter to all EU prime ministers urging them to quickly endorse the sanctions package, and to give their EU ambassadors the authority to sign off on them Tuesday. Some countries have been calling for an emergency summit of leaders to approve them, but Van Rompuy clearly wants to move faster. The text of the Van Rompuy letter, obtained by the Brussels Blog, is here:
Vladimir Putin, the Russian president, chairs a security council meeting at the Kremlin this week
Although the sanctions options paper prepared by the European Commission for today’s meeting of EU ambassadors offers up five different sectors of the Russian economy for possible restrictions, a full two pages of the ten-page document obtained by Brussels Blog focuses on the financial industry.
As we reported here this morning, the main financial proposal would bar all “EU persons” from investing in debt or equity sales made by state-owned Russian banks, which constitute most of the largest financial institutions in the country.
As is our practice, we thought we’d provide a bit more detail on the proposal here on the Blog. The health warning that needs to be attached to this plan, however, is that the likelihood of it being actually adopted remains slim. Thus far, only a small hard-core group of EU countries have supported moving to “phase three” sanctions, which hit entire Russian economic sectors rather than just targeted individuals. Sanctions need unanimity from all 28 EU countries to be enacted.
The meat of the capital markets proposal is pretty straight forward: if a Russian bank that is more than 50 percent owned by the government issues stock or bonds, no European can participate. As part of its impact assessment, the document estimates that between 2004 and 2012, $16.4bn was raised by Russian state-owned financial institutions through IPOs in EU markets. And in 2013 alone, about 47 per cent of all bonds issued by those banks — €7.5bn out of €15.8bn – were issued in the EU.
Here’s an excerpt of the proposal:
Sweden's Carl Bildt, centre, and Lithuania's Linas Linkevicius, left, urged an arms embargo
Trying to keep track of what the EU has agreed – or, in some cases, has agreed to consider – on sanctions against Russia is nearly impossible for those not following the machinations up close because the terminology and targets keep changing.
Tuesday’s meeting of EU foreign ministers was just the latest case in point. Some measures were “accelerated”, others were expanded, and still others were put off until a Thursday meeting of EU ambassadors. No new sanctions were agreed, but the nuances could prove important down the road.
According to EU diplomats, some of this lack of clarity is intentional obfuscation. The initial outline of how the EU would gradually ratchet up sanctions has proven politically unworkable, so those negotiating have consciously attempted to blur lines and shift focus to make it easier to get unanimous agreement on the next steps. Read more
A pro-Russian militant stands guard at a checkpoint outside Donetsk earlier this week.
UPDATE: We’ve now posted the draft communiqué on Ukraine. You can read it here.
Today’s special EU summit was originally called to hash out nominees for the remaining jobs atop the big Brussels institutions – the European Council president, the EU foreign policy chief and the chair of the eurogroup of eurozone finance ministers. But recent events in Ukraine have pushed Russia policy back onto the agenda.
According to a draft of the summit communiqué obtained by Brussels Blog – which was pulled together at a marathon session of EU ambassadors on Tuesday – EU leaders could go beyond so-called “phase two” sanctions, which involve targeting individuals for travel bans and asset freezes. But it won’t be all the way to “phase three”, which constitutes sanctions on entire sectors of the Russian economy.
The new intermediate phase, which diplomats say is an intentional blurring of phase two and three, would focus on four elements. First, the EU would cut all new project funding for Russia from the European Investment Bank and caucus together to prevent similar investments from other international organisations where EU countries are members – particularly the European Bank of Reconstruction and Development. Other international financial institutions are not mentioned by name, but diplomats said the World Bank was raised during deliberations. The draft language now looks like this:
Thorning-Schmidt, left, and Merkel at last week's EU summit. Is the Danish PM's star falling?
With Jean-Claude Juncker’s confirmation as European Commission president by the European Parliament in two week’s time something of a foregone conclusion, attention in Brussels corridors has turned to the other two top jobs that are due to be decided at a special summit July 16: European Council president and High Representative for foreign affairs.
According to officials and diplomats, there was much discussion of candidates’ names on the sidelines of last week’s EU summit, and while two weeks is a long time in politics, a few trends are emerging:
1. Momentum to get a centre-left candidate into the European Council presidency is stalling. Going into last week’s summit, it was widely assumed that because the centre-right European People’s party (EPP) got one of their own atop the Commission, the Council job would go to the centre-left Party of European Socialists (PES). But that conventional wisdom has changed. Read more
Van Rompuy meeting with Britain's David Cameron at Downing Street on Monday
The less-watched parallel process to selecting the new head of the European Commission has been Herman Van Rompuy’s effort, backed by several member states, to come up with a work programme for the new commission president that will lock him in for the next five years when it comes to policy programmes and priorities.
Even though advocates of such an idea appear to be pushing the same policies that are mentioned in nearly every EU summit communiqué, several countries – including strange bedfellows like the Netherlands and Italy – have argued such an agenda is in some ways more important than the leader who takes over the commission in November. They insist it will enable Europe’s prime ministers to put their stamp on the next commission and its priorities after the European Parliament was seen to have dragged the current one around.
As a first step towards agreeing such a programme, Van Rompuy, the outgoing European Council president, on Monday circulated a four-page “strategic agenda” for the new commission, which he hopes to get agreed at this week’s high-stakes EU summit. We wrote about it here, but as usual for readers of Brussels Blog, we’re providing a bit more detail for those more interested, including a copy of the document, which we’ve posted here. Read more
Campaign manager Selmayr, left, with Juncker on election night in Brussels last month.
In a town that is reading every tea leaf available to divine whether Jean-Claude Juncker, the ex-Luxembourg prime minister and front-runner for next European Commission president, will actually get the job, it seemed a rather big leaf of tea.
Martin Selmayr, the workaholic German lawyer who served as Juncker’s savvy campaign manager during last month’s European Parliament elections, took many EU officials by surprise when it was announced Wednesday he had been appointed to a top job in the London-based European Bank for Reconstruction and Development (see announcement here, under the “Five new senior management appointments” heading).
Many in Brussels had tipped Selmayr as Juncker’s chief of staff if he won the presidency. Prior to working for Juncker, Selmayr had been chief of staff to Luxembourg’s current commissioner, Viviane Reding, and he is close to the man who holds the powerful chief of staff job under José Manuel Barroso, fellow brainy German lawyer Johannes Laitenberger.
Is Selmayr’s departure a sign Juncker’s prospects for winning the presidency are dimming and he’s bailing out of a sinking ship? On Twitter, Selmayr denied it, tweeting: “You really think Juncker needs me to win? Believe in democracy!” Read more
Juncker, left, with Schulz ahead of a debate in Hamburg, Germany earlier this week
With voting now underway in Britain and the Netherlands, the first two EU members to go to the polls in the three-day continent-wide election to pick the new European Parliament, Brussels’ favourite parlour game – guessing who will emerge as the next president of the European Commission – has shifted into high gear.
As with almost everything in the EU, from the eurozone crisis to Russian sanctions, all eyes are on Angela Merkel, the German chancellor, and whether she will throw her backing to one of the two “spitzenkandidaten” – the lead candidates for the largest political groupings – or decide to back someone else for the job.
“Nobody knows,” says a top political operative from a German-allied country. “Everybody has their opinions and views, but nobody really knows.”
To play our part in the echo chamber, Brussels Blog has compiled its own completely unscientific odds on where the main candidates stand. And as they say in US sports betting, these odds are for entertainment purposes only. The Brussels Blog does not advocate gambling (though you can do so at the UK’s gaming company Ladbrokes).
José Manuel Barroso
Anyone expecting Jose Manuel Barroso, the European Commission president, to give any hint as to where EU summitteers might go on Russian sanctions when they gather later today, will be disappointed.
At a press conference following a pre-summit meeting with business and labour union leader to discuss Europe’s jobless recovery, Barroso would only say that “the most important thing to do” is to help create a “credible, stable, prosperous, democratic Ukraine.” Read more
Ukraine's prime minister Yatseniuk returns to Brussels Friday to sign the EU integration treaty
Just how sensitive is tonight’s summit dinner debate over the next steps for EU sanctions against Russia? According to EU diplomats, the meal will be for leaders only – no aides, no experts – and they won’t be allowed to bring in mobile phones or other electronic devices.
That’s because the next most likely step is what one senior EU diplomat termed “phase two-plus”: new names, potentially those closest to Russian President Vladimir Putin, are expected to be added to the list of 21 Russian and Crimean officials subject to EU visa bans and asset freezes.
As a result, the draft conclusions that were produced from last night’s meeting of EU ambassadors – which apparently includes those names – is not being given the normal circulation to national capitals and will only be given to leaders once they get into the room tonight. The draft produced before last night’s meeting, a leaked copy of which we’ve posted here, is the last one to get distributed more widely. Read more
Arseniy Yatseniuk, the Ukrainian prime minister, at last week's emergency EU summit
When EU diplomats meet again tomorrow in Brussels for another round of talks over Russian sanctions ahead of Monday’s foreign ministers’ meeting, one of the more peculiar points of debate will be about last week’s EU summit promise to sign the “political chapters” of their integration treaty with Ukraine.
Apparently, it may be almost impossible to do so legally – even though the current plan is to have them signed at the EU leaders’ regularly-scheduled summit next Thursday. Bit of a pickle, no?
For those not following things that closely, the EU’s “association agreement” with Ukraine is the thing that first set off the current crisis, after then-President Victor Yanukovich decided not to agree the pact – both a free trade deal and a political affiliation agreement – on the eve of a big summit designed around the signing ceremony. The months of protests that followed eventually led to Yanukovich’s downfall.
At last week’s emergency summit on the Ukraine crisis, EU leaders took many by surprise when they decided to sign the non-trade portions of the treaty – essentially the Preamble, Title I and Title II of the text, which can be read here – even though European Commission officials had previously indicated that they’d wait for a “legitimate” government in Kiev to be elected in the new May presidential vote. Read more
Juncker delivers his acceptance speech Friday at the EPP's party congress in Dublin
By Vincent Boland in Dublin
It is one of the biggest events in the European political calendar. The pre-European parliament election congress of the centre-right European People’s party, which concluded Friday in Dublin, was notable for several things. But three in particular stand out.
The first is that the congress – well organised, held at the new(ish) Dublin Convention Centre, and hosted by Fine Gael, the leading party in Ireland’s coalition government – was a triumph for Enda Kenny, the Irish Taoiseach (prime minister). He managed to both look and sound statesmanlike.
Moreover, Kenny’s rebuttal of José Manuel Barroso, the European Commission president, will have done his domestic poll ratings no harm at all. Barroso, an EPP member who attended the congress, lashed out at critics of his handling of the eurozone crisis, blaming “panic in the financial markets” and too much self-imposed austerity for the pain being felt across the eurozone economy. Read more
The USS George HW Bush aircraft carrier
With the Russian buildup of forces in Crimea continuing unabated, the internet has been filled with reported sightings of US naval vessels heading into the Black Sea, most recently the USS George HW Bush aircraft carrier which, in reality, was merely heading to the Greek port of Piraeus for a long-scheduled port call.
The latest addition to this internet buzz was reports that Turkey had given the US navy permission for a warship to sail through the Bosphorus, the narrow straight that connects the Eastern Mediterranean with the Black Sea. Read more
José Manuel Barroso announces the Ukrainian aid programme on Wednesday
The EU’s announcement on Wednesday of a new €11bn aid package for Ukraine is both more and less than it first appears.
The “more” part of the package comes in the €1.6bn of so-called “macro-financial” assistance, which is the traditional kind of direct budget aid that we’ve come to recognise in eurozone bailouts. Up until the fall of Victor Yanukovich’s Russia-backed regime in Kiev, the EU had only signed up to €610m in such loans, so the extra €1bn is a significant increase.
The “less” part of the package is the estimated €8bn to come from Europe’s two development banks, the European Investment Bank and the European Bank for Reconstruction and Development. That aid is contingent on finding infrastructure projects to fund in Ukraine, which may prove a fraught exercise. In any case, it’s likely to be long-term assistance of only marginal use to the struggling technical government in Kiev right now. Read more
Sweden's Carl Bildt, Poland's Radoslaw Sikorski and EU's Catherine Ashton consult on Ukraine
As is frequently the case with high-level EU documents, the draft communiqué distributed to national capitals ahead of today’s emergency meeting of foreign ministers is more interesting for what has not been agreed going into the session than what is already set in stone.
And according to a draft obtained by the Brussels Blog, quite a bit is left to be decided, including just how aggressive the ministers will be in threatening sanctions – or “targeted measures” in Eurospeak – against Russia. Our main story on the leaked communiqué gives the outline of the dispute, but as is our practice at the Blog, we decided to post a bit more information here. Read more
Anders Fogh Rasmussen, Nato's secretary general, before a meeting Sunday on Ukraine
Even though Ukraine is not a member of Nato – and therefore is not covered by the alliance’s mutual defence treaty – the west has signed a series of bilateral agreements with Kiev over the last 20 years in which it has agreed to help protect Ukraine’s territorial integrity.
Given the rapidly escalating events inside Ukraine, such international agreements may seem a mere legal nicety. But many in Ukraine believed the pacts provided the country with a measure of security, and they will still help guide the west’s response to Russian activities.
Perhaps just as importantly, leaders in other capitals in the region who either have or are contemplating similar agreements with the west – be they association agreements with the EU or partnership action plans with Nato – are surely watching to see if these pacts are worth the paper they’re written on.
In the White House’s statement after President Barack Obama’s phone call with his Russian counterpart Vladimir Putin on Saturday, Washington referred to several of those agreements, starting with the so-called “Budapest Memorandum”. Here’s a quick primer on the international texts that govern the west’s – and, in many cases, Russia’s – relations with Ukraine.
A slide from a January 2014 investor presentation by the Ukrainian finance ministry
First of all, just how much financial trouble is Ukraine in?
Almost all major economic powers were out on Monday saying that any aid package would have to wait for a full International Monetary Fund programme. But such “stand-by arrangements” can take months to negotiate – and IMF officials have made clear they want a new government firmly in place before those negotiations can begin, so that may mean we’re waiting until after May’s presidential elections.
So will Ukraine make it until then? Analysts are dubious, and the Ukrainian finance ministry’s declaration on Monday that they are seeking bilateral loans from the US and Poland in the next week or two certainly implies that they’re not sure they can make it that long either.
One key metric to watch is Ukraine’s foreign currency reserves, which for those not seeped in international finance is about as close to a national bank account for emerging market economies as you can get. If Ukraine runs out of reserves of dollars, it can’t pay any of its bills to foreign creditors – such as bondholders or gas providers – and essentially goes broke. Read more
Barroso, right, meets with UK prime minister David Cameron at Downing Street last year.
José Manuel Barroso, the president of the European Commission, caused quite a kerfuffle in London at the weekend when he said on one of Britain’s most-watched political chat shows that Scotland would find it “extremely difficult, if not impossible” to rejoin the EU if it were to secede from the UK.
But for those who have been following the debate closely, Barroso’s position had been telegraphed long before – in fact, it has been the stated European Commission view for nearly a decade.
In 2004, then-Commission president Romano Prodi, in a statement published in the Official Journal of the European Union – where all laws and decisions must be published before they can take legal effect – made clear that any region that decided to declare independence must reapply for EU membership and face the same kind of unanimous agreement as any other applicant: Read more