MacroScope

Acid test of EU’s resolve over Russia

By Mike Peacock
July 21, 2014

Emergencies Ministry member walks at the site of a Malaysia Airlines Boeing 777 plane crash near the settlement of Grabovo in the Donetsk region

EU leaders said over the weekend they would be prepared to impose tougher sanctions on Russia, giving Vladimir Putin one more chance to douse the violence in eastern Ukraine and help investigators do their work at the site of the crashed Malaysian airliner or face the consequences.

A statement from the British government said Germany’s Angela Merkel, Britain’s David Cameron and France’s Francois Hollande agreed on a telephone call that their ministers should be ready to announce a fresh round of sanctions at a meeting of the European Union’s Foreign Affairs Council on Tuesday.

There is already scope to toughen measures announced last week to hit Russian companies that help destabilise Ukraine and to block new loans to Russia through two multilateral lenders. The EU foreign ministers are tasked with preparing a first list of people and entities from Russia that would be targeted. The number of individuals and companies to be penalized is up for grabs.

The weekend round of diplomacy sounds like a more dramatic move is possible. Could that be the “sectoral” sanctions that Washington has pushed for which could deliver a really serious blow to the already flatlining Russian economy and start shutting it out of international trade and commerce?

Not quite sure. The threats so far have been general rather than specific. Russia provides up to a third of the EU’s energy needs and Germany has particularly strong trade ties.

Sweeping sanctions will inflict pain on the imposers too – on London’s dominant financial centre, on German commerce, on Italian energy security. Are they up for it? And will France finally give up on its 2.1 billion euros contract to sell helicopter carriers to Moscow? These are the litmus tests of their will to act.

Angela Merkel talked tough on Friday but also said it was too early to talk about further sanctions. She spoke to Putin over the weekend and urged his cooperation. If Germany did decide Russia had to be properly isolated economically – still an if – the rest of the EU would probably fall in behind.

There is no sign of any change in the rebels’ behaviour so far and Putin has made no public appeal to them or called for new moves to tighten controls at Russia’s border.

The U.N. Security Council is considering a draft resolution to condemn the attack, demand armed groups allow access to the crash site and call on states in the region to cooperate with an international investigation. It could be put to a vote as early as today.

U.S. Secretary of State John Kerry said the evidence overwhelmingly indicated a Russian missile was used and that the United States had seen supplies moving into Ukraine from Russia in the last month, including a 150-vehicle convoy of armoured personnel carriers, tanks and rocket launchers given to the separatists.

Kiev said it had “compelling evidence” the missile launcher was not just brought in from Russia but manned by three Russian citizens who had now taken the truck-mounted system back over the border. Russia denies any involvement and has tried to throw the spotlight back onto Kiev.

Dutch Prime Minister Mark Rutte said a team of victim identification specialists was likely to enter the crash site on Monday, four days after the Boeing 777 went down in eastern Ukraine with the loss of all 298 on board. Negotiations are under way to bring a train containing some of the bodies under Ukrainian government control.

Up to 100 Palestinians and 13 Israeli soldiers were killed on Sunday in the bloodiest fighting in a near two-week-old offensive and the death toll continues to mount today. Palestinian President Mahmoud Abbas accused Israel of carrying out a massacre in the eastern suburbs of the city of Gaza. Turkish Prime Minister Tayyip Erdogan said Israel had surpassed “Hitler in barbarism” through its attacks – inflammatory language to say the least.

Israel advised its citizens against travelling to Turkey, citing the public mood after attacks on Israeli diplomatic missions during protests in Istanbul and Ankara on Friday. Kerry will travel to Cairo for meeting with Egyptian and other senior officials.

The July 20 deadline for a deal over Iran’s disputed nuclear programme was duly extended over the weekend. Tehran and the six world powers agreed to extend the negotiations by four months, and let Iran access another $2.8 billion of its cash frozen abroad during that period, though most sanctions remain in place.

Iran faces Western pressure to make concessions over its atomic activities. Germany – one of the major powers trying to persuade Iran to curb its programme – warned that the extended talks might be the last chance for a long time to reach a peaceful solution.

South Africa’s finance minister will speak in parliament on the annual budget after labour unions representing striking South African metalworkers submitted a lower wage demand to employers to try to end the walkout battering Africa’s most developed economy.

South Africa’s Reserve Bank raised interest rates modestly for the second time this year last week, trying to strike a balance between the need to rein in inflation while allowing the economy to grow.

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