THREE DAYS AFTER Russian President Vladimir Putin signed the final decree that completed the take-over of Crimea, EU leaders were continuing their closed-door talks on whether to expand the list of Russian and Crimean officials who would be hit by asset freezes and travel bans.
The agreement reached by the European Council on 21 March, extended sanctions against 12 mid-ranking Crimean and Russian officials along with cancelling the next EU-Russian summit. These ‘phase two’ sanctions, part of a three-stage plan agreed by EU leaders at 6 March European Council summit, were mocked by Russia’s Deputy Prime Minister Dmitry Rogozin on Twitter.
The EU could have implemented tough economic and financial penalties, known as ‘phase three’, in tandem with the ‘phase two’ sanctions at the European Council summit on 21 March. Yet, discussions on ‘phase three’ were avoided for fear of splitting the EU’s common position on the annexation of Crimea. The lack of census amongst member states over ‘phase three’ will only embolden Putin, with the possibility of the Ukraine losing more territory to Russia.
The division within the European Council over the implementation of ‘phase three’ is driven by economic and security concerns. Some member states are concerned about the implications that ‘phase three’ sanctions would have on their economies, as Russia is an important trading partner for many of these countries. According to figures from Germany’s Federal Statistical Office, Destatis, there are 6,100 German companies operating in Russia, with a turnover of €40bn. Major firms like Continental, Siemens and Volkswagen along with hundreds of middle-sized business, known as mittelstand, would face having their assets seized or frozen by the Russian government in response to ‘phase three’.
Of course Germany is not the only member state whose companies are operating in Russia. Some of France’s largest firms, such as Axa, Danone, Société Générale and Renault, are some of the biggest players in the Russian domestic economy. Société Générale for example owns one of Russia’s biggest financial institutions, Rosbank. A number of smaller EU member states have similar concerns about the fallout of ‘phase three’ sanctions. Cyprus is the second biggest destination for Russian capital, where $33bn has been either invested or deposited in Cypriot banks and businesses according to the Federal State Statistics Service of Russia – while the biggest non-EU market for Hungarian goods and services is Russia.
Balancing out the economic concerns of some member states are the fears by the Baltic countries that they could be next in Russia’s firing line. In Estonia for example, a quarter of the country’s population speaks Russian and in some of the country’s cities, such as Narva, Russian speakers are in the majority. Latvia too has significant pockets of Russian speakers, in the town of Daugavpils 51 per cent of population speak Russia and in the country as a whole it is around 35 per cent. Poland and Romania also share the concerns of the Baltic republics, pointing to the threat that Russia poses to the security of Europe.
While the annexation of territory in the Baltic states is arguably low, there is a real threat that Russia could move against the Donetsk, Kharkiv and Lugansk regions in the north-east of the Ukraine which contains a large number of Russian speakers. The Russian army can, according to the International Institute for Strategic Studies, deploy 144,000 troops from their Western Military District against a force of 65,000 Ukrainian troops stationed in the north-east region of the country. Without EU and NATO protection the Russian army, albeit with some difficulty, could invade the Donetsk, Kharkiv and Lugansk regions.
Such a move would be catastrophic for the EU. It would deepen the split between member states on how to react to Russian aggression, thus weakening the EU’s clout on the world stage and possibly damage Europe’s fragile economic recovery. Inaction by the EU would certainly force countries that have signed association agreements with the Union to think again, which would be the death nail to the European Neighbourhood Policy (ENP) and the Eastern Partnership (EaP) initiative, along with raising concerns amongst the Baltic states that they are on their own when it comes to facing Russia.
The price of pushing through the ‘phase three’ sanctions are no doubt high, but can the EU put a price on defending democracy in Europe?
David Moloney is a PhD student at the University of Limerick after having been awarded a scholarship. His PhD will explore the role of MEPs, and officials from the Council of Ministers in shaping the EU’s response to the economic crisis in the Member States. David is a former employee of the European Parliament. Follow him on Twitter @Dav_Moloney
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