EU prolongs Russia sanctions but analysts dub them ineffective

Russia's foreign ministry expressed disappointment at the extension of the European Union's sanctions on Moscow over the Ukraine conflict, blaming the move on an anti-Russian "lobby". EU foreign ministers formally agreed Monday to prolong economic sanctions against Russia until January 2016, saying the move aims to ensure it fully implements the Minsk peace accords.

A woman walks out of her damaged house in the town of Debaltseve, north-east of Donetsk, 17 March 2015 Reuters/Marko Djurica

The EU and the US have tried to hit Russia's banking, oil and defence sectors hard. 

And Brussels and Washington have warned that more sanctions may follow if Moscow fails to live up to commitments it made in February in Minsk to withdraw support for rebels in the east of Ukraine and use its influence with them to ensure the peace deal is fully implemented.

Three sets of sanctions against Russia are now in force.

Last Friday EU sanctions imposed as a reaction to Russia’s annexation of Crimea were extended to 23 July 2016.

They include prohibitions on imports of products originating in Crimea or Sevastopol into the EU; EU – Investment in Crimea or Sevastopol, tourism services (including cruise ships) in Crimea or Sevastopol and exports of military-related goods and technologies

A separate set of sanctions related to the Minsk Agreements was implemented on 31 July last year and on Monday EU foreign ministers decided to extend this set until January 2016.

A list of 151 people connected to the Donetsk and Luhansk areas was published on 17 March 2014. They face “restrictive measures” such as travel bans and EU visa restrictions. Thirty-seven institutions that are banned from official or commercial exchanges with their EU counterparts are also listed here.

A EU spokesperson said that this list will “expire in September” but that no decision has been taken yet as to whether to prolong its validity.

“The most important so far has been the financial sanctions,” explains economist Vasili Astrov of the Vienna Institute for International Economic Studies. Victims were “key state-owned banks and state-owned enterprises, particularly in the energy sector to borrow capital to borrow capital in European and American capital markets.”

Other types of sanctions included restrictions on the exports of oil-drilling equipment for technology in geographically challenging areas, the impact of those two have been more limited.

But the sanctions did not have the effect the EU may have wished for.

“The decline of oil and gas prices made much more substantive impact on the Russian economy,” says Sergei Tolstov, the director of the Institute for Political Analysis and International Studies in Kiev. “But the Russian economy is not too weak. It had a three-year period of substantial stability and the economic decline in Russia is smaller than during the economic crisis of 2008-9.”

In spite of the sanctions' apparent lack of effective, the EU did prolong them “to give the message to Russia”, according to Maja Kocijancic, spokesperson for the European External Action Service under the European Council.

“The EU had to react to the situation in Donbask [the Donetsk-Luhansk area]," says Tolstov. “Russia didn’t change its attitude towards the conflict, and the EU prolonged the period of the sanctions for another half year. So the crisis with the EU continues."

On Tuesday a meeting between the foreign affairs ministers of France, Germany, Ukraine and Russia will take place in Paris.

“They will speak about local elections, about the special monitoring mission of the OSCE and about the ceasefire,” says Tolstov. “But, in spite of two agreements signed, there is no real ceasefire.”

In retaliation Moscow prepared Monday to prolong its own embargo on Western food imports, expressing disappointment at Brussels’ extension of the EU sanctions.