Reuters blog archive
By Pierre Briançon
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
It took time for European Union leaders to agree on tough economic sanctions against Russia. The EU is slow. Its members have conflicting interests. Their economies don’t all have the same exposure to Russia. Yet they have finally agreed with the United States on a list of measures to punish Russian banks and oil companies. The already weak EU economy will suffer in return. But over time, Europe will find that the sanctions were worth the pain.
Russian state-owned banks will be cut off from Western capital markets. The country’s oil industry will not be able to access the foreign technology needed to drill in challenging territories like the Arctic. The travel of senior politicians and company executives close to the regime will be restricted, and they will fear for the money they have stashed abroad.
Even more important than the direct impact of the measures, Russia is becoming a pariah for investment and trade. It would take a brave and bold Western bank to, say, arrange a syndicated loan for a state-owned Russian company, even if that remains technically legal.
from The Great Debate:
As the European Union and the United States ramp up their sanctions on Russia, President Vladimir Putin’s plans for retaliation seem to include an attack on McDonald’s. There could not be a more powerful symbol that geopolitics is increasingly undoing the globalization of the world economy.
The burger chain was celebrated in the 1990s by the journalist Thomas Friedman’s “Golden Arches theory of conflict prevention,” which argued that the spread of McDonald’s around the world would bring an end to war. But almost 25 years after a McDonald’s restaurant opened in Moscow, it seems that deep interdependence has not ended conflict between great powers – it has merely provided a new battlefield for it.
True to its word, the EU agreed sweeping sanctions on Russia yesterday, targeting trade in equipment for the defence and oil sectors and, most crucially, barring Russia’s state-run banks from accessing European capital markets. The measures will be imposed this week and will last for a year initially with three monthly reviews allowing them to be toughened if necessary.
There was no rowing back from the blueprint produced last week – having already agreed to exempt the gas sector – and the United States quickly followed suit, targeting Russian banks VTB, Bank of Moscow, and Russian Agriculture Bank, as well as United Shipbuilding Corp.
from The Great Debate:
No one has admitted responsibility for firing the sophisticated missile that brought down Malaysia Airlines Flight 17, killing 298 people over Ukraine on July 17. But untrained rebels could probably have done it with a little practice. There are even instructions online, making it possible for nearly anyone who comes into possession of one of these systems -- anywhere in the world -- to use it.
Washington and Kiev both blame Russian-backed separatists from the self-proclaimed Donetsk People's Republic for attacking the plane with a 9k37 BUK missile system. These rebels had bragged about possessing the weapon before the attack.
President Barack Obama and the leaders of Germany, Britain, France and Italy agreed on a conference call last night to impose wider sanctions on Russia’s financial, defence and energy sectors.
EU ambassadors are meeting today and are expected to target state-owned Russian banks and their ability to finance Moscow's faltering economy.
from Stories I’d like to see:
There are so many gaps in the reporting about the effort to use economic sanctions against Russia to get President Vladimir Putin to pull back support for the Ukraine separatists that it makes sense to devote my whole column this week to listing them.
Of course, it’s a lot easier to identify the gaps than to do the reporting to fill them. Still, many are so obvious that it suggests that for all the resources spent on getting great video of the Malaysia Airlines Flight 17 crash site, interviews with the victims’ families and reports from the war front in eastern Ukraine -- all important stories -- there is more heat than light being produced when it comes to the most critical, long-term question related to the Ukrainian conflict: If economic sanctions are the global economy’s modern substitute for using military force in repelling aggression, how is that playing out in the first test of that strategy against a global economic player like Russia?
If it’s true to its word, the European Union will impose sweeping new sanctions on Russia this week, targeting state-owned Russian banks and their ability to finance Moscow's faltering economy.
EU ambassadors will continue discussions on the detail of new measures, most significant of which would be banning European investors from buying new debt or shares of banks owned 50 percent or more by the state.
The EU is slowly tightening the screw on Russia, with senior officials proposing yesterday to target state-owned Russian banks in its most serious sanctions so far. Ambassadorial talks on how precisely that is to be done continue today and the measures are likely to be enacted next week.
One key proposal is that European investors would be banned from buying new debt or shares of banks owned 50 percent or more by the state. These banks raised almost half of their 15.8 billion euro capital needs in EU markets last year. That is a big deal and there are increasing signs of investors turning their back on Russia lock, stock and barrel. However, with its giant FX reserves, the central bank can provide dollars to fund external debt for a considerable period of time.
from John Lloyd:
Russian President Vladimir Putin’s popularity has soared at home in the wake of his actions in Ukraine – and the masterful spin his intervention has been given.
The joy that greeted Putin’s seizure of Crimea from Ukraine in March was due, at least in part, to a propaganda system less complete but more virulent than its Soviet predecessor.
Interesting intervention from former Russian finance minister Alexei Kudrin late yesterday who warned that Russia risked isolation and having its efforts to modernize derailed.
That sort of internal criticism is rare but Kudrin has done so before without censure which suggests Vladimir Putin is – or has been - willing to hear it. Kudrin added that Moscow should not intervene militarily in eastern Ukraine.