12:07 PM Friday, June 22, 2018
How Serious are EU Moves Against New US Sanctions?
Kremlin misplayed its US cards, and now Russia faces years or decades of US economic sanctions
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LONDON -- I play down the assumption of EU action to prevent this latest development on Russian sanctions front. Efforts have been made by the US to bring the sanctions more in line with European interests. It seems very likely now that Congress will pass these sanctions. With Russia-gate scandal still running at full throttle, Trump will be in no position to stall in signing this into law.

For Russia this is a disastrous outcome. Sanctions will be codified into law, and end up being held in place for the longer term -- years/decades without a material, arguably, sea change in Russian policy and relations with the US. So much stickier now and likely much more damaging to the Russian economy. Some will argue that this is the outcome of Russia’s "offensive" action in meddling in the US elections, and importantly getting caught out by the US intelligence community.

For Russia, bad news in a good suit. Kurt Volker, the Trump Administration's special envoy for the Ukraine peace talks, blamed Russia on Sunday for the war in the nation's southeast, saying on a visit to a town near the front: "This is not a frozen conflict, this is a hot war and it is an immediate crisis that we all need to address as quickly as possible." Here, on July 11, he visited Prime Minister Groysman's office in Kyiv (UNIAN/ Vladislav Musienko)

Moscow now faces a dilemma.

It tried to head off the move to codify sanctions via its few remaining "friends" in DC. But these efforts seem to have come to naught. It latterly has tried to use allies in Europe. But again this seems likely to fail.

Now it is a question of back to the drawing board.

Does Moscow try and increase the stakes with Washington by trying to create some new leverage either by:

  • a) offering concessions elsewhere, e.g. over Ukraine
  • or
  • b) by playing hard-ball elsewhere (Ukraine, North Korea) to negotiate for a stay in execution over the new sanctions bill.

It is notable that there has been a step up in violence in eastern Ukraine over the past week. Moscow indicated today that they were unhappy with the latest UNSC resolution on N Korea.

For Moscow a question is: by now playing hard-ball with Washington, do they help or hinder Trump in his problems in fending off the Russia-gate crisis? Ultimately, Moscow sees Trump as a friendly face in the White House - as evidenced by Trump's endeavors at the G20 to get some "quality time" with Putin.

They don't want to cut that Trump-Putin bond completely. But they are struggling now to figure out how to actually reap some positive dividends from their US political "activities".

Timothy Ash is senior sovereign analyst at Blue Bay Asset Management in London

EU Mulls Retaliation Against U.S. Over New Russia-Sanctions Plan

By Jonathan Stearns

(Bloomberg) -- The European Union said it would be prepared
to retaliate against the U.S. should Washington hit Russia with
new sanctions that affect EU-based energy companies, risking a
deeper trans-Atlantic split over economic and security policies.
The European Commission, the bloc’s executive arm, made the
threat as U.S. lawmakers prepare to give the green light as soon
as this week to economic penalties against Russia over its
meddling in last year’s American presidential election. The
draft U.S. measures would prohibit American businesses from
being involved in energy projects that include Russian
companies, including ventures outside Russia.

“The EU is always ready to respond adequately and
imminently should the case be needed,” Margaritis Schinas, the
commission’s chief spokesman, told reporters on Monday in
Brussels. “I will not speculate on any retaliation.”

The latest trans-Atlantic tensions follow sharp
disagreements over U.S. President Donald Trump’s “America First”
agenda, including his anti-trade stance, his withdrawal from an
international treaty to fight climate change and his criticism
of European nations for failing to spend more on defense. The
fresh friction also contrasts with close cooperation between the
EU and former U.S. President Barack Obama over sanctions against
Russia for its encroachment in Ukraine.

Expanded Sanctions

The commission, led by President Jean-Claude Juncker, is
echoing concerns expressed by German Chancellor Angela Merkel,
whose spokesman said in June that the U.S. Congress’s plan for
expanded sanctions against Russia posed a threat to European
economic interests. One casualty could be the planned $10
billion Nord Stream 2 natural-gas pipeline between Russia and
Germany, a project that to some extent would compete with U.S.
exports of liquefied natural gas to Europe.

Schinas said the adequacy of energy supplies for the EU is
at stake and the commission is engaged in a diplomatic offensive
to limit the impact of any U.S. measures on the bloc, expressing
“hope” that no European countersteps will be necessary.
“We are activating all diplomatic channels to address these
concerns -- from these U.S. measures -- with our U.S.
counterparts,” he said. “We expect” Europe’s “interests to be
addressed by the ongoing, pre-legislative process.”

The Financial Times and Politico reported on Monday that
Juncker planned to put retaliation against the U.S. on the
agenda of a regular meeting of EU commissioners on July 26,
citing an internal commission note. Both reports said the goal
is for the 28-nation bloc to be able to react “within days.”

Separately, the commission is preparing for possible
retaliation against the U.S. over a threat by Trump to curb
steel imports on national security grounds. In June, EU Trade
Commissioner Cecilia Malmstrom said she was “extremely worried”
about the possibility of such American trade restrictions,
saying they could trigger protectionist reactions around the

To contact the reporter on this story:
Jonathan Stearns in Brussels at

Posted July 24, 2017

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