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How far do EU-US sanctions on Russia go? How far do EU-US sanctions on Russia go?
(25 days later)
The EU is preparing further sanctions against Russia for backing Ukraine's separatists, who are accused by the West of shooting down a Malaysia Airlines passenger plane. The EU has tightened sanctions against Russia for backing Ukraine's separatists, who are accused by the West of shooting down a Malaysia Airlines passenger plane on 17 July.
The West has so far refrained from "sectoral sanctions", also known as Level Three sanctions, that would target entire sectors of Russia's economy. As a result, companies in Russia's crucial energy sector can still do business with Western partners, but they will probably find it harder to get Western loans. The EU has expanded its blacklist to cover some key economic sectors, going further than the US sanctions. Both the EU and US have blacklisted dozens of senior Russian officials, separatist commanders and Russian firms accused of undermining Ukrainian sovereignty.
What will be the scope of new EU sanctions? What is the scope of new EU sanctions?
The EU is planning to expand its list of Russian officials, businessmen and entities under asset freezes and travel bans. The EU sanctions announced on 30 July for the first time target directly Russia's state finances, energy and arms sectors. These are sectors managed by the powerful elite around President Vladimir Putin.
Its targets will be those considered "materially or financially supporting actions undermining or threatening Ukraine's sovereignty, territorial integrity and independence". Russian state banks are now excluded from raising long-term loans in the EU, exports of dual-use equipment for military use in Russia are banned, future EU-Russia arms deals are banned and the EU will not export a wide range of oil industry technology, though gas remains unaffected.
The list of names will be released by the end of July. It means the EU will probably follow the US lead in targeting more individuals in President Vladimir Putin's inner circle, as well as some major companies. In addition, dozens of senior Russian officials and separatist leaders are now subject to Western asset freezes and travel bans.
An asset freeze means not only bank accounts and shares but also economic resources such as property. So somebody on the list is not allowed to buy or sell their assets in the EU, once the freeze is in force. The targets are those considered "materially or financially supporting actions undermining or threatening Ukraine's sovereignty, territorial integrity and independence".
The travel ban means preventing that person entering an EU country, even if the person is in transit. They would be placed on a visa blacklist. The EU has also followed the US lead in targeting more individuals in President Putin's inner circle, as well as some major companies.
An important target is Bank Rossiya, described as the "personal bank" for senior Russian officials. Its biggest shareholders - Yuri Kovalchuk and Nikolai Shamalov - are blacklisted. They were also co-founders of the mysterious Ozero Dacha Co-operative, a housing community on the shore of Lake Komsomolsk founded in 1996, whose members accumulated massive fortunes under Mr Putin.
Arkady Rotenberg, another long-time acquaintance of Mr Putin, is also under EU and US sanctions. He used to practise judo with Mr Putin and now runs major infrastructure projects. He and his brother Boris own SMP bank and both won lucrative contracts for the 2014 Sochi Olympics.
The Kremlin deputy chief of staff Vyacheslav Volodin is also under EU and US sanctions. And some top Russian generals are blacklisted.
The EU - but not the US - has blacklisted the heads of Russia's intelligence services.
An asset freeze means not only bank accounts and shares but also economic resources such as property. So those on the list are not allowed to buy or sell their assets in the EU, once the freeze is in force.
The travel ban means being prevented from entering an EU country, even if a person is in transit. They would be placed on a visa blacklist.
There are however some exemptions. Diplomatic immunity still has to be respected, so diplomats can be exempted. A targeted individual may also be exempted on humanitarian grounds, for example if he/she needs to pay for medical treatment. An EU Council document defines the scope of such sanctions.There are however some exemptions. Diplomatic immunity still has to be respected, so diplomats can be exempted. A targeted individual may also be exempted on humanitarian grounds, for example if he/she needs to pay for medical treatment. An EU Council document defines the scope of such sanctions.
Previously the EU has focused on individuals and a handful of entities directly linked to the Russian annexation of Crimea and the separatist uprising in eastern Ukraine.
The most senior Russian official targeted by the EU so far is Vyacheslav Volodin, the Kremlin deputy chief of staff. He is also on the US list. Some top Russian generals are also under EU sanctions now.
The EU is also considering whether to impose an arms embargo on Russia. UK Prime Minister David Cameron is pushing for that now. There has been much criticism of France's decision to go ahead with the sale of two Mistral helicopter carriers to Russia. On 21 July France said it could halt delivery of the second warship, depending on Moscow's attitude over Ukraine.
What has the US done?What has the US done?
The US sanctions affect powerful people close to President Putin - some of Russia's richest businessmen.The US sanctions affect powerful people close to President Putin - some of Russia's richest businessmen.
Among them is Gennady Timchenko, a founder of the commodity trading firm Gunvor. He owns Volga Group, an investment firm with stakes in energy, transport and infrastructure, including Novatek, Russia's second biggest gas producer.Among them is Gennady Timchenko, a founder of the commodity trading firm Gunvor. He owns Volga Group, an investment firm with stakes in energy, transport and infrastructure, including Novatek, Russia's second biggest gas producer.
Igor Sechin is another big name on the US list. He is a former intelligence officer and long-term ally of Mr Putin, the most prominent of the "siloviki" ("tough guys") who influence Kremlin policy.Igor Sechin is another big name on the US list. He is a former intelligence officer and long-term ally of Mr Putin, the most prominent of the "siloviki" ("tough guys") who influence Kremlin policy.
Mr Sechin is chairman of the huge state-owned oil firm Rosneft, which has energy partnerships with ExxonMobil and the UK's BP.Mr Sechin is chairman of the huge state-owned oil firm Rosneft, which has energy partnerships with ExxonMobil and the UK's BP.
Mr Putin himself is not on the list - why? Western leaders do not want to treat Russia as an international pariah - they still want to be able to meet Mr Putin face-to-face. If he were on the sanctions list it would become harder to put direct diplomatic pressure on him. The West still needs Russian co-operation on a huge range of issues, including Iran and North Korea.Mr Putin himself is not on the list - why? Western leaders do not want to treat Russia as an international pariah - they still want to be able to meet Mr Putin face-to-face. If he were on the sanctions list it would become harder to put direct diplomatic pressure on him. The West still needs Russian co-operation on a huge range of issues, including Iran and North Korea.
Last week the US expanded its list to include more Russian businesses - including Rosneft and Novatek - as well as Gazprombank, part of the Gazprom state conglomerate. A Russian state bank dating back to the Soviet era - Vnesheconombank - is also on the list. In July the US expanded its list to include more Russian businesses - including Rosneft and Novatek - as well as Gazprombank, part of the Gazprom state conglomerate. A Russian state bank dating back to the Soviet era - Vnesheconombank - is also on the list.
The famous Kalashnikov arms firm is there too, as are the unrecognised, self-styled "people's republics" established by the separatists in Ukraine's Donetsk and Luhansk regions.The famous Kalashnikov arms firm is there too, as are the unrecognised, self-styled "people's republics" established by the separatists in Ukraine's Donetsk and Luhansk regions.
Do any of these measures really hurt the Russian economy?Do any of these measures really hurt the Russian economy?
The sanctions send a strong signal to Mr Putin and his powerful allies in business and politics.The sanctions send a strong signal to Mr Putin and his powerful allies in business and politics.
The banks and energy companies listed will find it harder to access US capital markets. The banks and energy companies listed will find it harder to access US and EU capital markets.
And the Western travel bans may hurt Mr Putin's rich and well-connected friends, though the asset freezes may affect them less. London is a popular haunt for Russia's business elite, many of whom have bought expensive properties in Britain.And the Western travel bans may hurt Mr Putin's rich and well-connected friends, though the asset freezes may affect them less. London is a popular haunt for Russia's business elite, many of whom have bought expensive properties in Britain.
The EU does much more business with Russia than the US does, so the narrower scope of the EU sanctions reduces the overall impact. The EU does much more business with Russia than the US does.
But observers say the sanctions are potentially grim for a Russian economy that has slumped this year. After years when Russia was buoyed by oil income the economy is now facing weaker direct investment and soaring capital flight. Observers say the sanctions are potentially grim for a Russian economy that has slumped this year. After years when Russia was buoyed by oil income the economy is now facing weaker direct investment and soaring capital flight.
Capital worth $75bn (£44bn) has left Russia so far this year - a much higher rate of haemorrhage than last year.Capital worth $75bn (£44bn) has left Russia so far this year - a much higher rate of haemorrhage than last year.
Russia is teetering on the brink of recession. The economy grew just 1.3% last year and did not grow at all between April and June.Russia is teetering on the brink of recession. The economy grew just 1.3% last year and did not grow at all between April and June.
What could the EU lose from worse business ties?What could the EU lose from worse business ties?
Some EU countries will feel the impact more than others. Russia has become a booming market for Western consumer goods in the past decade.Some EU countries will feel the impact more than others. Russia has become a booming market for Western consumer goods in the past decade.
Germany appears especially reluctant to ratchet up sanctions. That is not surprising, as German exports to Russia totalled 38bn euros (£30bn; $51bn) in 2013 - the highest in the EU. Germany has appeared especially reluctant to ratchet up sanctions. That is not surprising, as German exports to Russia totalled 38bn euros (£30bn; $51bn) in 2013 - the highest in the EU.
More importantly, Germany gets more than 30% of its oil and gas from Russia. The Netherlands and Italy are also highly dependent on Russian energy and some of Russia's former Soviet bloc neighbours rely 100% on its gas deliveries. More importantly, Germany gets more than 30% of its oil and gas from Russia. Italy is also highly dependent on Russian energy and some of Russia's former Soviet bloc neighbours rely 100% on its gas deliveries.
The EU's trade with Russia - worth nearly 270bn euros in 2012 - dwarfs US-Russia trade.The EU's trade with Russia - worth nearly 270bn euros in 2012 - dwarfs US-Russia trade.
Food exporters are already facing losses after Russia announced an immediate embargo on a wide range of food imported from the EU, US, Norway, Canada and Australia. It was announced as a response to the Western sanctions.
Fresh fruit and vegetables, meat, dairy produce and various other foods are affected by the Russian ban, which will last at least a year.