EU extends sanctions against Russia until January 2016

The EU Foreign Ministers Council decided on June 22 to extend sanctions against the Russian Federation until Jan. 31, 2016 for its role in fueling the military conflict in eastern Ukraine, according to an EU statement. The goal of the sanctions is “the full implementation of the Minsk accords,” tweeted Maja Kocijancic, an EU spokeswoman. The sanctions include restricted access to financial markets, as well as a ban on certain technologies and exchanges between the EU and Russia in the energy and defense sectors. They were imposed in July last year and are separate from other sets of sanctions imposed for annexing the Crimean peninsula.

In response, the Russian Foreign Ministry said in a statement that it was “deeply disappointed that once again in the EU, the view of the russophobic lobby has prevailed” in the extension of the “illegal restrictions,” reported the guardian.com news site. The ministry said it was wrong to hold Russia fully responsible for the implementation of the peace agreement and that the key to a settlement was in Ukraine’s hands. As retaliation, Russia extended its ban on many agricultural imports from the EU.

Russia and Western countries are set to maintain a “status quo” in bilateral sanctions in the foreseeable future, Andrei Belousov, an assistant to the Russian president, told The Wall Street Journal on June 20, as reported by the RBK news agency. A balance has been found in the sanctions and anti-sanctions and it will be maintained, he said. The most painful Western sanctions have been the loss of Russian banks and companies to access to global capital markets, he said. The Russian financial system is adopting to new realities, he said, estimating that capital flight will reach USD 100 billion in 2015, or USD 50 billion excluding paying debt to foreign banks.

Zenon Zawada: The West and Russia are reaching compromises behind the scenes that are oriented towards freezing the conflict in Donbas. A frozen conflict acts as a drain on both the Ukrainian and Russian economies, both of which will be severely damaged by the time it’s resolved, which could be many years down the road.

What Belousov didn’t mention in his comments this weekend was that the status quo is only a temporary remedy, and that Russia needs more sanctions lifted if it is to avoid an economic meltdown in two years’ time. This is the big wild card in the conflict, the outcome of which can’t be predicted. Putin will either have to find a way to back out of Donbas and Crimea and admit defeat, or expand the conflict. Perhaps the West is hoping for regime change initiated by the Russian elite, but that might not have positive results either. It’s a very fragile situation.