Amid all the furore over David Cameron’s failure to block Jean-Claude Juncker for the top EU job at a summit last week, the bloc’s leaders signed a free-trade pact with Ukraine and said they could impose more sanctions on Russia unless rebels de-escalate in the east of the country by Monday.
In turn, Ukraine president Poroshenko extended a ceasefire by government forces until 10 p.m. local time today.
The Russian economy would contract should the West introduce wide-ranging sectoral sanctions but that would not be a “dramatic” situation, Economy Minister Alexei Ulyukayev said over the weekend.
Conversely, with the hunt for yield still well and truly on, last week’s bond issue by Russia’s biggest lender Sberbank could unleash more pent-up Russian issuance despite the threat of tougher sanctions.
The EU leaders said they were ready to meet again at any time to adopt new sanctions against Russia and could target new people and companies with asset freezes as early as this week. But, given its energy reliance on Russia, the EU is much more hesitant than Washington about deploying the sweeping trade embargoes that would really hurt.