Russia: Shorter EU Sanctions Extension under Consideration

Published on November 5, 2015

 

Germany’s Vice-Chancellor and head of Chancellor Angela Merkel’s coalition SPD partner Sigmar Gabriel suggested on October 29 the EU consider a step-by-step easing of its financial and trade sanctions in place against Russia since July 31, 2014 in exchange for step-by-step implementation of the Minsk Accord by Moscow.

 

*** Gabriel’s proposed scaling down of sanctions, a clear political attempt by the SPD head to distance his party from Merkel’s center-right CDU/CSU, will, we are told, be largely rejected by EU officials as too much, too soon in concessions to Moscow. Our understanding nevertheless is that European heads of state may consider a shorter term, perhaps three to four-month, extension of the current sanctions against Russia at their December 17-18 European Council meeting, as opposed to a previous six month extension, as an incentive for President Vladimir Putin to encourage – and possibly speed up – continued cooperation on the regional elections in the Ukrainian rebel provinces of Donetsk and Luhansk, tentatively planned for February of 2016. ***

 

*** The decision will be subject to an assessment of progress on the Ukrainian conflict that will be carried out in the “Normandy format” summit between Germany, France, Ukraine, and Russia that will take place tomorrow. But what is perhaps most interesting is that all parties are quietly moving away from a Minsk II agreement clause tying the successful implementation of the plan to the return of the Donetsk and Luhansk borders with Russia to full Ukrainian control after the last October 2 “Normandy” meeting in Paris. ***

 

*** The elimination of that explicit provision by the Europeans, by far the most difficult to implement and enforce, means the parties are in effect moving towards a more pragmatic, new agreement, call it a “Minsk III” accord. That is in no small part due to the fact that it now appears even the Ukrainian government itself is no longer terribly keen on fighting for control of the Donbass, a mafia state with a criminal economy, and as a consequence the EU has decided to focus on propping up the rest of the country’s economic and political stability. While not happy with the frozen conflict, Brussels, at least, is quietly beginning to accept it as the lesser of evils. ***

 

The possibility of a return to some degree of “normality” in trade between the EU and Russia will have limited impact on the broader ongoing freeze in political and military relations between Moscow and the West, which is likely to last for some time regardless of the situation in the Donbass. High-level NATO officials and diplomats for example are very dismissive of the prospects for reopening a dialogue with Putin on European security the Kremlin seems to have hinted it would like to engage in.

 

But a shorter than six month extension of EU sanctions could nevertheless provide a boost to investor sentiment about the prospects for the Russian and European markets and economies.

 

Accepting the New Reality

 

The fierce fighting that marred Donetsk and Luhansk until summer 2015 has virtually ended on the Donbass frontline. The withdrawal, currently under way, of heavy weapons by both sides and – in particular – the recent decision by the leaders of the self-proclaimed republics of Donetsk and Luhansk to postpone their own elections (though it is still unclear whether they will be scrapped) are all signals that the situation is improving, and that the parties are at least starting to comply with the Minsk II provisions.

 

EU sources point out that the elections had of course been called in the first place by the rebels under the directions of Moscow, and describe Putin’s assistance in postponing them as fixing a crisis of his own making. But they also seem to agree that the implementation of Minsk II is now slowly but clearly under way, even if behind schedule, and are carefully optimistic that – barring any aggressive new move by Putin – it is just a matter of when, and no longer if, it will be completed.

 

That being said, there are both tactical and substantive reasons for the EU not to soften the so-called “sectorial” sanctions just yet.

 

For one, the kind of dramatic shift on the ground the EU requires to begin reconsidering its stance has not yet happened. EU diplomats and officials believe the sanctions have indeed been effective in changing Putin’s calculation on the Donbass conflict, which they point out has always been the aim of the measures, and not to arbitrarily punish Russia, but the progress is still clearly not enough.

 

So despite Gabriel’s suggestions the sanctions will remain effective in their entirety until there is full implementation of Minsk II or, better, whichever new agreement is on the table.

 

But what appears to have happened in Paris at the October 2 Normandy Meeting was indeed significant in that it set the bar significantly lower for Russia, at least for now, for reaching an eventual solution.

 

EU countries, Russia, and Ukraine seem to have at least implicitly now agreed that one of the key provisions of Minsk II, the return of the border between the rebel republics and Russia to Kiev’s full control, will probably never take place.

 

After all, the thinking goes in some of the more sympathetic or pragmatic European capitals, Russia already had to give up its original conviction that it “owned” Ukraine after the November 2013 Euro-Maidan uprising, as well as subsequent threats that it could tear it apart at will. It has indeed swallowed two small pieces, but has failed so far to make a failed state out of Ukraine.

 

And that is seen as a victory for the West and the EU, who will focus its efforts on helping the country recover and prosper.

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