Obama impatient with EU over Russia

April 28, 2014

The G7 has said tougher sanctions on Russia could be imposed as soon as today. EU ambassadors  are holding an emergency meeting in Brussels.

The EU will extend travel bans and asset freezes to more people involved in the Ukraine intervention. For now, Washington is treading the same path though maybe more explicitly targeting Vladimir Putin’s “cronies”.

Barack Obama is already looking ahead to a third round of measures and hinted at impatience with Europe, saying there had to be a united front if future sanctions on sectors of the Russian economy were to have real bite.

One key question for this week’s measures will be whether Rosneft’s Igor Sechin and Gazprom’s Alexei Miller are put in the firing line this time. A top Obama aide said the measures would target people in Putin’s inner circle who have a significant impact on the Russian economy and the companies they control, and would also curb high-tech exports to Russia’s defense industry.

In eastern Ukraine, there’s been a lot of brinkmanship over the holding by separatists of eight European observers who were there under the auspices of the OSCE.

Last night, pro-Russian rebels freed a Swedish observer on medical grounds but said they had no plans to release the other seven international monitors. Heavily armed pro-Russian gunmen have seized civic buildings in towns and cities across the east.

Slovakia and Ukraine have reached an agreement on opening up limited capacity for reverse flows of natural gas from central Europe and will sign the deal on Monday. Bratislava will adjust an old unused pipeline so it can ship over 3 billion cubic metres of gas a year to Ukraine from around October, rising to up to 10 bcm by early next year.

Ukraine needs much more than that but Slovakia is refusing to allow bigger shipments — up to 30 bcm per year – along the main international pipeline running from Russia, fearing that would break its contracts with Russian gas firm Gazprom. European Commission President Jose Manuel Barroso will meet Slovak President Ivan Gasparovic and Prime Minister Robert Fico in Bratislava.

Ahead of euro zone inflation data on Wednesday, which could go a long way to dictating if and when the European Central Bank will act, ECB President Mario Draghi and his colleagues Vítor Constâncio, Benoît Cœuré, Christian Noyer and Peter Praet are all speaking as is  Danièle Nouy, head of the ECB’s new bank regulatory arm.

Our polling suggests inflation will rise to 0.8 percent from 0.5 which would militate against action at the May policy meeting. New ECB staff forecasts are due in June and by then the picture may be clearer but at best the central bank would be likely to start by shaving ultra-low interest rates and possibly pushing the deposit rate – already at zero – marginally into negative territory.

It is just as likely to do nothing at all, unless its inflation forecast has been downgraded markedly. The big game changer would be QE – printing money – and even though ECB policymakers, including the Bundesbank chief, say that is a real option, it is probably nowhere near. Draghi has also put the currency firmly on the ECB’s agenda, declaring that a stronger euro would prompt an easing of monetary policy.

The current contenders to become the next European Commission President – centre-right candidate Jean-Claude Juncker, Martin Schulz of the centre-left and liberal Guy Verhofstadt – will hold a first televised debate in the Netherlands.

All of them are far too federalist for the likes of Britain so could well be vetoed in the end, leading to the customary horse trading among EU leaders for a compromise candidate.

Scottish First Minister Alex Salmond will deliver a keynote speech at the College of Europe in Bruges, probably responding to Barroso’s assertion that an independent Scotland would have a hard time getting into the EU.

UK Foreign Secretary William Hague got his retaliation in first, publishing a letter to Salmond asking for clarification on a number of issues regarding Scottish EU membership. Negotiations would at best be long and complex, he said, and the terms which Salmond seeks are at odds with the EU’s rules.

Algerian President Abdelaziz Bouteflika is expected to be sworn in for fourth term after landslide victory his opponents dismissed as a massive fraud. Bouteflika has promised to address the nation especially after concerns about his condition with the leader still recovering from a stroke and after he was seen voting from a wheelchair.

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