Foreign policy

Russian president Vladimir Putin visits a Rosneft oil refinery on the Black Sea last year

EU ambassadors head into yet another meeting Friday afternoon to hammer out the latest round of sanctions against Russia. Their bosses have promised to get things done by the end of the week, but there’s still a lot of work to do, so it’s not entirely clear whether a deal can be reached. Also, the on-again, off-again Ukrainian ceasefire could slow things down, though allies don’t appear to be giving much credibility to the Kremlin’s protestations that they are working towards a truce.

As we wrote in today’s dead-tree edition of the FT, we got a leaked copy of the draft legislation approved by the European Commission on Wednesday and sent to national capitals for today’s deliberations. The 18-page text is filled with a lot of jargon and technicalities, but because they could directly affect financial markets, the details matter.

For that reason, we are offering Brussels Blog readers more detail here. Remember: the EU ambassadors could still change much of the wording in their negotiations – though if the July sanctions are any indication, the changes are likely to be on the margins. Read more

Russia's Vladimir Putin, right, talks to EU foreign policy chief Catherine Ashton last month in Minsk

As we reported in today’s dead-tree edition of the FT, we got our hands on the three-page Russia sanctions options paper circulated by the European Commission and the EU’s diplomatic corps to national delegations yesterday that, for the first time, raised the spectre of boycotting the 2018 World Cup, to be hosted by Moscow.

But the meat of the document is the actual sanctions that are likely to be agreed this week; the World Cup suspension is clearly mentioned as something that only would be considered in the future. So as is our tradition here at the Brussels Blog, we thought we’d provide readers a bit more detail, including excerpts from the document itself.

First, though, here’s the language on the World Cup, which also includes a mention of UEFA, the Union of European Football Associations which organises and runs all international competitions for European soccer clubs – including Russia’s. Read more

Italy's Mogherini, the likely next EU foreign policy chief, arrives at a meeting with her counterparts

If EU leaders are going move forward with additional sanctions against Russia for its increasingly aggressive stance in Ukraine, they have a bit of work to do. The current draft of Saturday’s summit conclusions (we’ve posted a copy we got our hands on here) has very little to say on the topic.

Right now, the operative paragraph on sanctions reads like this:

The European Council remains engaged in the monitoring and assessment of the restrictive measures adopted by the European Union and stands ready to consider further steps, in light of the evolution of the situation on the ground.

Not particularly stirring stuff.

One other point to note in the draft: not only will the summit choose a new EU foreign policy chief (in all likelihood Italian foreign minister Federica Mogherini) and a new president of the European Council (either Polish prime minister Donald Tusk or Danish premier Helle Thorning-Schmidt), but they also must choose someone to head eurozone summits. 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:

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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:

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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:

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When looking for scapegoats for the EU’s energy crisis and our dependence on Russian gas, it is all too easy to attack “district heating”.

District heating is the main way that cities are heated in eastern Europe and the Soviet-era infrastructure can often be wastefully inefficient, as we write about in a story today.

But don’t write it off too quickly. The truth is that western Europe is probably going to see a lot more of this technology in the next decade as it rethinks its urban energy consumption. 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