EU Extends Economic Sanctions on Russia Until End of January

The Wall Street Journal The Wall Street Journal

LUXEMBOURG—European Union foreign ministers extended broad economic sanctions on Russia until the end of January 2016, a move designed to give the bloc time to gauge if the Kremlin will fully implement its side of February’s Minsk cease-fire and peace plan by year-end.

The EU decision came without a debate among ministers, underlining that despite months of public questioning of sanctions by the likes of Greece and Hungary, the bloc remained united in opposing Russian pressure on Ukraine.

That unity will continue to be tested in coming months if the fragile cease-fire holds as pressure grows within the bloc to broaden dialogue with Russian President Vladimir Putin and his government.

EU officials have argued that the banking, technology and defense industry sanctions have had a significant impact in weakening Russia’s economy, helping to push the country into recession alongside a sharp drop in the oil price. The sanctions were due to expire at the end of July.

Critics say the policy has had no effect in forcing Moscow to re-examine its policies and is sowing a deep division between the EU and its eastern neighbor.

In March, EU leaders tied an easing of the Russian sanctions to a complete implementation of the cease-fire agreement, setting the stage for Monday’s decision. The Minsk accord sets a late December deadline for Russia to take a key step: handing back control of large swaths of Ukraine’s eastern border to Kiev.

Russia retaliated against the sanctions last summer, banning a range of EU agricultural exports, a move that EU officials say has cost European firms around €5 billion ($5.7 billion) in lost sales. Russian officials had already made clear that if the EU pressure was maintained, so would its export ban.

“Russia obviously considers these sanctions unfounded, illegal and we have never been nor are we initiators of sanctions,” Kremlin spokesman Dmitry Peskov said Monday.

The EU and the U.S. blame Moscow for financing and arming pro-Russia separatists in Ukraine and say Moscow has sent thousands of troops over the border. Russia denies those charges.

Valeriy Chaly, foreign policy adviser to Ukrainian President Petro Poroshenko, said in an emailed statement that Kiev welcomes the EU decision to extend sanctions, says it sends “a clear message” to Moscow about the bloc’s “solidarity” with Ukraine.

“It proves that the only way for Moscow to lift restrictive measures is to abide responsibly by letter and spirit of the peace accords and international law, rather than taking efforts to undermine the EU unity by political, economic or propaganda means.”

The EU’s economic sanctions were approved in two stages last year—first in late July, days after the downing of the Malaysia Airlines Flight 17 plane over eastern Ukraine that killed almost 300 people. Then the measures were extended in early September as the fighting in Ukraine grew more intense.

The centerpiece of the measures was a ban on 11 Russian state-owned oil companies, banks and defense firms raising money in the bloc’s capital markets or receiving loans from EU people or firms. Targets included Rosneft, the oil production and refining subsidiary of OAO Gazprom, Sberbank and VTB Bank.

The EU also banned the exports of high-technology equipment for deep water, Arctic and shale production and exploration. They prohibited the sale of weapons and dual-use items to the Russian military and to a number of defense firms.

Last week, the EU extended by a year sanctions on Crimea, the region that was annexed by Russia in March 2014. The measures include an import ban, prohibiting investments in the region and banning EU cruise ships from stopping there.

The bloc still has several key decisions to take in coming months. The EU must renew—or let expire—by mid-September asset freezes and travel bans on more than a hundred Russian lawmakers, officials and pro-Russia separatists. EU officials had been pushing to make this decision before the summer break but it isn’t clear if that will happen.

More broadly, there is pressure within the bloc for the EU to define more clearly its longer-term relations with Russia. Some countries, including Italy, Luxembourg and Greece want the bloc to examine ways of improving ties on a range of geopolitical, trade and commercial issues.

Others, among them the U.K., Poland and the Baltic states, have warned against any return to business as usual and urged the EU to be ready to tighten sanctions if there is fresh violence in eastern Ukraine.

“We have to show our unity about sanctions…but at the same time you have to involve Russia in the dialogue in several different files that we have in the international arena,” Italian Foreign Minister Paolo Gentiloni said. “But dialogue is absolutely crucial.”