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Ukraine

Trade ties expose EU, US rift over Russia sanctions

As the US moves to impose sanctions on Russia over Crimea, the EU calls for more negotiations. The European Union and the United States have threatened Russia with punitive measures if Moscow does not reduce tensions in Ukraine. But some European countries are reluctant to impose sanctions due to close trade ties with Russia.

Scrambling to react to the crisis in Crimea, the Obama administration has threatened Russian officials with visa bans and asset freezes, if the Kremlin refuses to roll back its military intervention in the Black Sea peninsula. But the European Union has proven reluctant to follow suit, holding out hope that diplomacy can resolve the Cold War-style crisis on its doorstep.

The White House has already suspended military ties and trade talks with Moscow, while the entire Group of Seven (G7) industrialized nations have agreed to not participate in preparations for their summit in Sochi this June. Meanwhile, EU foreign ministers met in Brussels on Monday, where they strongly condemned "the clear violation of Ukrainian sovereignty and territorial integrity by acts of aggression by the Russian Federation."

Although the EU threatened to suspend bilateral talks with Moscow on trade and visa liberalization and "consider further targeted measures," the bloc did not explicitly place the threat of economic sanctions on the table. The EU's 28 leaders are scheduled to meet for an emergency summit on Thursday, where they will consider whether or not to impose punitive measures.

"It's clear that everybody would like to see this crisis solved politically without imposing sanctions, because those would severely damage bilateral relations," Paul Ivan, an expert on EU sanctions with the European Policy Center, told DW.

"Sanctions are the most serious measure you can take before going to war," he said.

'Sanctions that bite'

As Russia's largest trading partner, the EU wields considerable economic clout with its eastern neighbor. In 2012 alone, the two traded nearly 400 billion euros worth of goods and services. And EU member states accounted for nearly 75 percent of the foreign direct investment stocks in Russia, according to figures published by the European Commission's Directorate-General for Trade.

trader and picture of putin

Tit-for-tat sanctions will hit business hard

But the economic relationship is one of mutual dependence. Approximately 33 percent of the EU's petroleum imports come from Russia, according to Eurostat. And key actors in the EU, such as the UK and Germany, have their own national economic interests at stake in the country.

"There can be sanctions that will actually bite," Ivan said. "One of the problems is that those would also bite the European economy."

In contrast to the EU, the United States trade in goods with Russia amounted to just 30 billion euros ($40 billion) in 2012, according to the US Census Bureau.

No trade sanctions…for now

On Monday, a freelance journalist managed to snap a picture of a secret document being carried by an unnamed British official on the way to a national security council meeting in Downing Street. The document said that Britain "should not support, for now, trade sanctions…or close London's financial centre to Russian officials."

If the EU is broken down into member states, then Germany is Moscow's third largest trade partner overall after the Netherlands and China, accounting for 35 percent of all EU exports to Russia. That's according to the Committee on Eastern European Economic Relations, which represents German business interests in the region.

"We have to see the consequences of possible countersanctions in the areas of raw material deliveries and entry bans for German and European citizens," Rainer Lindner, the managing director of the committee, told the Reuters news agency.

Russian President Vladimir Putin warned during a news conference on Tuesday that sanctions would ultimately backfire against the EU and US. Russian lawmakers are working on legislation that would confiscate property, assets and accounts of US and European companies if sanctions are imposed, according to the RIA news agency.

Unanimous decision required

The EU also has a cumbersome decision-making process compared to the US. All 28 member states will have to unanimously agree on a sanctions package. With each of those countries having a different relationship with Russia, Ivan believes compromise will be inevitable.

"In the end because you have 28 member states, and not as in the case of the US where you have only one administration that has to decide, here you have to reach a lot of compromises," he said.

"Even before the crisis you had differences between EU member states in how they see relations with Russia, so we might see the EU taking decisions slower than the US, or having less tough measures."

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