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July 29, 2014

EU Sanctions Against Russia – Who Will Feel the Pain?

by Lisa Bryant

European Union governments have agreed to impose new sanctions against Russia that will target, among other areas, its defense sector, with Washington poised to follow. Experts agree the measures were long in coming but there seems to be little agreement over how painful they will be for Russia – and for Europe itself.

Agreed to by European Union ambassadors meeting in Brussels, the new sanctions are expected to go into effect rapidly.  While the details are still sketchy, the measures aim to hit sensitive areas of Russia's economy, including its oil, technology, banking and defense sectors. The ambassadors also extended their list of people subject to EU travel bans and asset freezes.

The 28-member bloc only recently slapped sanctions on Russia over its alleged support of the separatist rebellion in Ukraine, and expanded them only reluctantly. Analysts say it was strong pressure from Washington, coupled with the downing of the Malaysian airliner in eastern Ukraine that killed 298 people, most of them European citizens, that has changed the EU's thinking and prompted it to act.

European Council on Foreign Relations Paris office director Edouard Tetreau says the slow move to action was "classic" European diplomacy.

"European diplomacy always does the right thing, but at the very last minute after all other options have expired.  We have seen it with the euro crisis a few years ago.  We are watching it live now, with the Russia crisis," says he.

Now, Tetreau says, Europe and the United States must work to ensure their sanctions against Moscow make a difference.

"It will hit hard the Russian economy at a difficult moment for that economy.  And that, in the short term, will create difficulties.  But in the medium [to] long term, it can show to Mr. Putin's Russia a path for a more pacific (peaceful) and more reasonable partnership with Europe," says Tetreau.

EU member states may also stand to lose.  Russia is the block's third biggest trading partner.  London's financial sector, Germany's energy imports and France's defense industry all count on doing business with Russia.

But Ian Bond, Director of Foreign Policy at the London-based Center for European Reform, predicts the new measures will not be tough enough.

"The direct pain is going to be pretty limited.  It looks as though these are technically tier-three sanctions.  They are very much at the bottom end of what could be done under tier three," says Bond.

Unlike Western sanctions against Iran, Bond does not think these measures will bring Moscow to the negotiating table, and may harden its stance on Ukraine.  An arms embargo, for example, is expected to target future deals with Russia, not past contracts like France's agreement to sell a pair of Mistral warships to Moscow.

But analyst Tetreau says in the case of the Mistrals, Brussels is considering another solution - buying the warships itself.