EU-Russia dialogue: Will the EU lift sanctions on Russia?

The visit of the European Commission president Juncker to St. Petersburg and the meeting with Putin will potentially lead to the lifting of sanctions against Russia.

Photo by: AP
Photo by: AP

Russian President Vladimir Putin, right, gestures as he listens to European Commission President Jean-Claude Juncker during their talks at the St. Petersburg International Economic Forum in St.Petersburg, Russia, Thursday, June 16, 2016.

Updated Aug 11, 2016

The visit by the President of the European Commission Jean-Claude Juncker to an economic forum in St. Petersburg in mid-June will determine if the EU will lift the sanctions against Russia or not.

The visit is the first after Russia’s illegal invasion of Crimea and its support of  separatists in the eastern side of the Donetsk and Luhansk regions of Ukraine.

Juncker insisted that the EU must continue dialogue with Russia despite Western sanctions.

Russia's President Vladimir Putin (right) meets Jean-Claude Juncker in Moscow on a visit in September, 2012. [AFP]

“When our relations are tense we must keep talking, even when economic sanctions are in place we must keep talking, and I’m here today because I want to build a bridge,” he said.

Baltic countries were the most outspoken in their criticism of Juncker’s visit to Russia and issued a letter saying that the visit will strengthen Putin’s position in the region.

In his speech, Juncker stressed that implementation of the Minsk agreement "is the only way to lift the sanctions" and end the conflict.

The Minsk agreement, which was agreed on February 11, 2015 among Russia, Ukraine, France and Germany, aims to implement a ceasefire in the ongoing war in the regions.

Russia’s adoption of ‘hybrid warfare’ and the ‘Gerasimov doctrine’ defined the invasion in Crimea and the support of rebels in eastern Ukraine.

The western sanctions against Russia were a response to the illegal annexation of Crimea. But Juncker associates the lifting of the sanctions to the Minsk Agreement, which is unrelated to Crimea.

Tit for tat

In response to the illegal annexation of Crimea and Russian support for the rebels in the Donetsk region in Ukraine, the  EU in March of 2014 imposed various sanctions on the Russian Federation.

EU’s diplomatic sanctions include travel bans and freezing the assets of people allegedly involved in actions against Ukraine's territorial integrity.

At a G7 meeting in Brussels in June 2014, the EU member states supported the suspension of negotiations over Russia's joining the OECD and the International Energy Agency.

The bloc decided to cancel the EU-Russia summit and not to hold regular bilateral summits. Talks with Russia regarding visa matters were suspended.

The EU followed this by imposing economic sanctions in July 2014 and further added another phase of sanctions  in September 2014.

The European Council in March 2015, stated that these economic sanctions would stand until the completion of the Minsk agreements.

Sanctions affected the transport of goods and technology, telecommunications, energy, the export of gas and mineral resources to Crimean companies or for use in Crimea.

Three major Russian defence companies and five major state-owned banks also were sanctioned by the bloc.

Ukrainian government soldiers from battalion "Donbass" guard their positions in the village of Mariinka near Donetsk, eastern Ukraine, Monday, Aug. 11, 2014. [AP]

In response, Russia imposed a ban on food imports from Western nations in August 2014.

On the other hand, Ukraine reduced the volume of water flowing into Crimea via the North Crimean Canal and banned Russian TV channels, including international versions such as Rossiya-1, Channel One and NTV,  boycotted Russian goods and halted all transportation to Crimea.

Russia’s annexation of Crimea and supporting rebels in eastern Ukraine cut the relations between two countries. Besides the recession in Ukraine, it  failed to agree on the restructuring of a $3 billion Eurobond held by Russia in December 2015.

At the beginning of 2016, Moscow unilaterally stopped applying the CIS-FTA (Commonwealth of Independent States - Free Trade Area) to Ukraine and introduced the MFA (Multi-Fibre Arrangement) tariffs. This was the end of the free trade policy.

EU-Russia relations

Economic ties

Since 2010, economic relations between the EU and Russia have been unstable and dependent on the pace of economic growth in Russia.

The trade decrease started in 2013 which coincides with the Russian economic decline.

The sanctions in 2014, the fall of oil prices, and growing economic tensions in Russia led to a dramatic trade decline in some industries. Thus, the Russian currency the Rouble faced a decrease that affected the cost of labour and made domestic products more competitive.

Russia reduced agricultural exports to the EU by 50 percent in 2015, as compared to 2013.

Hydrocarbon is one of the most important exports for the Russian economy and it decreased by 42 percent in 2015 compared to 2012. The volume of the trade remains the same, but its value has decreased because of oil prices.

Gas pipelines

As of 2009, natural gas from Russia is delivered to Europe via 12 pipelines, three of which are direct pipelines to Finland, Estonia and Latvia. Four through Belarus to Lithuania and Poland and five through Ukraine to Slovakia, Romania, Hungary and Poland.

In 2011 a pipeline called Nord Stream, that goes directly to Germany through the Baltic Sea, was opened.

Following gas crises in 2006 and 2009, Russia proposed the South Stream pipeline.  But since Gazprom’s business strategy includes both the extraction of gas and its delivery and shipment to markets via pipelines in which the company holds a significant stake, this practice was against the set of directives imposed by the EU called the Third Energy Package.

As a result in December 2014, South Stream was cancelled. Gazprom is currently facing antitrust lawsuits for unfair pricing and monopolistic behaviour.

Globally speaking the EU is against both of these pipelines, arguing that Ukraine is just fine as a transit country.

Russia will not, or so it seems, renew its contract with Ukraine that expires in 2019. If Russia does build Turkish Stream and reroutes the gas currently transiting through Ukraine, it will likely result in a diplomatic confrontation.

EU-US relations

Most of the European countries and all of the EU members along with the US are allied countries in NATO. In a show of strength, NATO kicked off a military drill in Poland in June, the largest of its kind since the Cold War, amid tensions with Russia.

The war game, dubbed Anaconda-2016, is a military exercise involving 30,000 troops from 24 countries. America contributed 14,000 troops. The exercise also included 12,000 Polish troops, 800 British and more from non-NATO countries.

Recently, at a NATO summit in Poland, the Alliance agreed to deploy four battalions totalling 4,000 troops in the Baltic states.

The security dilemma between NATO and Russia raises tensions in the Black Sea and the Baltic region which further destabilizes the region.

The ongoing Transatlantic Trade and Investment Partnership agreement between the US and EU is worth at least $100 billion. The agreement aims at promoting trade and multilateral economic growth which is believed to “liberalise one-third of global trade.”

Is Russia using refugees as leverage against the EU?

Tens of thousands of refugees are seeking asylum in EU member countries.

According to the International Organization of Migration data,  the influx of refugees to Europe is higher than before the Russian intervention in Syria. Russia intervened in Syria in September of last year.

The refugee arrivals in Europe in September 2015 was a little over 163,000 and after the intervention, that increased to 220,000.

Moreover, according to reports, after the intervention, 832 civilians were killed in three months and 1,378 civilians including 310 children and 179 women were killed in the first half by Russian forces.

In April 2016, Russian and the US agreed on Cessation of Hostilities at the end of February which aimed to stop fighting between warring parties excluding DAESH and al Nusra Front.

The ceasefire was repeatedly violated by the Syrian regime’s aerial bombardment, which caused the destruction of buildings, and displacement of residents. In April the opposition decided to postpone its participation in Geneva talks.

The Syrian regime and Russian forces resumed bombing areas outside the regime’s control, and the casualty rates increased to its levels before the ceasefire.

Western and neighbouring countries alleged that Russia was “weaponizing” refugees.

The EU wants to deal with the refugee crisis and stem the influx of refugees to Europe. As a result, it needs Russian help to restrain Syria’s Bashar Assad, but this gives Russia further leverage with the EU.

There are deep relationships between the EU and Russia, that cannot be hastily broken. On the other hand, Ukraine is a pro-western country and important for the EU as it is the closest country to the Russia.

It is obvious that EU is not going to forego its main interests of energy supply, raw materials and other economic ties with Russia. On the other hand, the EU is also not going to abandon its ties with Ukraine, which is allied with NATO and the US.

The US supports continued sanctions against Russia but Juncker said in 2015 at a conference that Russia must be treated “decently” and added, “We can’t let our relationship with Russia be dictated by Washington.” This statement implies that the relations between the EU and Russia might be heading in a positive direction, which can ultimately lead to the easing or lifting of sanctions on Russia.

Author: Ali Topchi

TRTWorld and agencies