Limp wrist diplomacy?

Europe, Russia and sanctions

Limp wrist diplomacy?

Mar 21st 2014, 15:41 by Charlemagne | BRUSSELS / http://www.economist.com/blogs/charlemagne/2014/03/europe-russia-and-sanctions

“WHEN you throw a punch you hurt your wrist,” David Cameron, the British prime minister, told fellow EU leaders at a summit dinner in Brussels this week as they agonised over whether to impose economic sanctions on Russia. President François Hollande of France made the point differently: “For sanctions to be effective, they must hurt those they target and those who impose them.”

Such is Europe’s fear of economic pain, and of retaliation by Russia, that its leaders held back from imposing economic penalties on Russia for its annexation of Crimea. They added 12 names to the list of people subject to visa bans and having their assets in Europe frozen. But in many ways they were only catching up with America’s list of designations issued on March 17th, which included members of President Vladimir Putin's inner circle—among them Dimitry Rogozin, Russia’s deputy prime minister, as well as two presidential advisers, Vladislav Surkov and Sergey Glazyev—which the EU omitted.

The Europeans did not follow America’s next step, taken on March 20th, to extend the sanctions list to Sergei Ivanov, Mr Putin’s right-hand man, as well as alleged business cronies of the Kremlin (the list is here). The leaders did agree to examine “economic, trade and financial restrictions” targeted on Crimea itself so that, for example, the region could not export goods to the EU without Ukrainian customs stamps. But few officials could identify many Crimean exports to the EU.

In the bureaucratic jargon of Brussels, the annexation of Crimea merits only "Stage 2" sanctions: visa bans, asset freezes and political wrist-slapping. The latter includes suspending G8 meetings, halting formal bilateral summits and stopping negotiations on Russia’s membership of the OECD, a rich-world think-tank, and the International Energy Agency. Stage 3 sanctions, comprising unspecified “far-reaching consequences for relations on a broad range of economic areas”, would be triggered by further Russian actions “to destabilise the situation in Ukraine”. (The communiqué is here.)

What the sanctions might consist of, and how the pain might be spread more or less evenly across the EU, was left for the European Commission to study. And what would trigger the penalties would be for leaders to decide in future. But the word from Germany, among others, was that economic sanctions would be imposed only if Russia sought to occupy parts of Ukraine beyond Crimea. In other words, Crimea has been abandoned as a lost cause, to become at best a frozen conflict like the partition of Cyprus—something “we have to recognise but not accept”, as one senior EU figure put it.

For the Europeans, the attempt to stand up to Mr Putin has become an exercise in protecting themselves against accusations of being pusillanimous in comparison with America (whose own response has also been measured). Europeans put up various defences against the charge of being soft on Russia’s move forcibly to change Europe’s post-war borders. First, they say they are far more exposed economically than America, so cannot afford to be as forceful. Halting Russian money would hurt London and Luxembourg; blocking Russian visitors would harm Cyprus and Greece; and a gas war with Russia would hurt many countries in eastern Europe (see this week's Charlemagne column “Adrift over energy”). The Bruegel think-tank has produced a useful graphic here to illustrate the vulnerabilities.

Second, they claim that their actions, even if more limited, hurt Russia more. Some Russians may be upset if they are prevented from going to New York. But they care much more about being unable to visit London, Nice or Limassol.

Third, they say the crisis over Ukraine is going to be a drawn-out affair. Better to pace oneself and to have a graduated series of responses to ratchet up the pressure on Mr Putin.

Fourth, leaders said they faced different legal constraints on how far they could go in targeting individuals, who had to be identified as having a direct role in the annexation of Crimea. Although the European Court of Justice has thrown out a number of cases of individual sanctions, officials say the real issue is a question of political wall: the criteria for sanctions can be expanded by a ministerial decision to include providing “material support” to the Russian government. A British attempt to introduce such language in the communiqué was fought off, but officials say it is the obvious next step. Moreover, as in the case of Iran, any future economic sanctions might be introduced by a process of creeping sanctions on individual economic entities.

Fifth, they Europeans argue they are uniquely placed to do one thing that is more valuable than anything America can produce: the political and economic rehabilitation of Ukraine. “The strongest rebuke to Russia is a strong and successful Ukraine,” declared Mr Cameron.

On March 21st, the 28 leaders signed part of the EU association agreement with Ukraine, the very issue that last November sparked the crisis, revolution and invasion. The deal has been split. Only the political chapters were signed this week, leaving the economic dimension, including the “deep and comprehensive free-trade agreement”, for another day, probably after Ukraine’s planned presidential election on May 25th. In the meantime, the EU decided unilaterally to open its frontiers to a wide range of Ukrainian exports. The reason for the split treatment is two-fold: first, to deny Russia an easy claim that the economic co-operation violates Russia’s accords with Ukraine and, second, to maintain pressure on the transitional Ukrainian government to embark on economic and political reforms, and reach agreement with the IMF on an adjustment programme.

Nevertheless, the symbolism was striking: Russia’s invasion of Crimea has accelerated the Ukrainian government’s alliance with Europe and America. With a round of applause, the Ukrainian prime minister, Arseny Yatsenyuk, was fully embraced by Europe’s leaders. Herman Van Rompuy, president of the European Council, said the deal was “but the opening act” of the relationship, designed to show “our steadfast support for the course the people of Ukraine have courageously pursued”.

The leaders said they would also speed up the signature of similar association agreements with Moldova and Georgia, both of which have frozen conflicts and parts of their territory occupied by Russian forces. It is possible that the crisis could thus spread to other post-Soviet republics.

For one senior EU figure, “Putin’s goal is not Crimean; his goal is Ukraine…Ukraine is the jewel in the crown.” All of which might explain the declaration, on the day that the association agreement was signed, that Russia would seek $16 billion that Ukraine supposed owes it for gas deliveries.