While the proposal, which is expected to be approved next week, is sure to have some impact, its narrow scope reflects growing division over how to hit Russian President Vladimir Putin without putting more pressure on the EU itself.
Despite successive rounds of sanctions, the Russian economy is still standing. The country continues to earn billions in revenue from energy exports. And he continues to wage a brutal war in Ukraine.
At the same time, the war cast a shadow over European economies. The leaders of EU countries are faced with low growth and record inflation. The euro is at par with the dollar. The appetite for further disruption is low.
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Although EU officials insist the bloc remain united on Ukraine, the bloc’s leaders seem less inclined to act in concert and increasingly focused on domestic issues, raising questions about what comes next. in Ukraine.
Two months after the European Commission offered more than $9 billion in macro-financial assistance for Kyiv, for example, the bloc has given the go-ahead to send around a ninth of that sum.
European Commission President Ursula von der Leyen said on Friday that the latest sanctions will ensure that Russia continues to “pay a high price for its aggression”. Analysts note, however, that Russia has been able to bear these costs – at least so far.
“The impact of sanctions is probably not as severe as originally thought,” said Clay Lowery, executive vice president of the Institute of International Finance, the global trade organization for the finance industry. financial services. “The exit ramp for Russia has been energy exports.”
Immediately after Russia invaded Ukraine on February 24, the EU moved quickly to target Russia’s war chest, hitting the Kremlin with sweeping sanctions.
But Europe, which in 2021 imported about 40% of its natural gas and more than a quarter of its oil from Russia, has lagged behind the more diverse United States in reducing Russian energy imports.
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It took weeks of heated debate for the EU to agree to phase out imports of Russian oil. To reach an agreement, the bloc was forced to grant extensions to several countries, moderating the short-term impact.
On natural gas, the EU hasn’t collectively agreed to go further than it did in March, when the bloc said it would cut Russian imports by two-thirds this year. . Moscow has since threatened to completely cut off gas to Europe, leaving countries scrambling to find alternative supplies and prepare for a harsh winter.
Meanwhile, Russia has benefited from soaring energy prices. The Helsinki-based Energy and Clean Air Research Center estimates that Moscow earned around $100 billion from energy imports in the first 100 days of the war – and that around 60% of this money came from the EU.
To limit Russia’s revenue from energy sales, the United States is pushing for a global cap on Russian oil prices. Although there are some signs of momentum, EU diplomats have said the issue is not expected to be seriously heard until after Brussels’ recess for the summer, if at all.
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An EU diplomat, who spoke on condition of anonymity to discuss the ongoing negotiations, said the bloc’s deadly battle over phasing out oil was making countries nervous about reopening oil talks under any circumstances.
Paolo Gentiloni, the EU’s economy commissioner, told reporters on Thursday that the commission was considering the price cap proposal but that such measures would only be considered in “extraordinary future scenarios”.
For now, the EU will focus on implementation and enforcement. The European Commission calls its latest proposal a “maintenance and alignment package” which clarifies a number of provisions.
In addition to the new Russian gold import ban, the package will add people to the sanctions list, “strengthen” export controls on dual-use goods and advanced technologies, and bring EU sanctions closer to those partners.
The package also “reaffirms that EU sanctions in no way target trade in agricultural products between third countries and Russia”, according to a statement – an effort to counter dubious claims by Russia that EU sanctions the EU, not the Russian blockades, are to blame. rising food prices.
An EU official, speaking on condition of anonymity to brief the media, said the adjustments will help empower the bloc’s sanctions, especially in the medium to long term.
“We see that they are weakening the Russian economy. There are short term impacts and certainly medium and long term impacts,” the official said. “I hope we can convince you of our determination to keep the sanctions biting.”
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