Thursday - Jun 22, 2017

EU reported to be to considering increasing economic sanctions on Russia


EU reported to be to considering increasing economic sanctions on Russia

Ambassadors of the 28 European Union (EU) member countries are meeting in Brussels to discuss the feasibility of applying a new list of sanctions on Russia following the shooting down of the Malaysian Airlines Boeing 777 over eastern Ukraine last week, allegedly by Russian backed rebels.

Among the sweeping sanctions reportedly to be discussed by the EU ambassadors in Brussels will be a proposal to disallow Europeans from acquiring either new debt or stock issued by Russia’s largest banks, as well as barring Russian banks from listing new issues on European exchanges. A move that will prevent major Russian banks from continuing the practice of employing London based or other EU stock markets as a vehicle to raise funds from non- European entities.

According to information received by the media, the sanctions proposal, at least initially, would not allow for disallowing Russian sovereign bond auctions, reportedly to prevent the Russian finance ministry from retaliating and calling for end to Russian purchases of EU government debt, which is a valuable pipeline for the hard-pressed European economy.

In the event that the proposed sanctions are put into effect it would certainly need a considerable escalation on any sanctions imposed to date, and especially those ordered by the United States just a few weeks ago, which specifically targeted, Gazprombank and VEB, two of Russia’s largest banks.

The EU proposal, on the other hand, would have a direct effect on all Russian based holding more than 50 percent public ownership.

According to information released before the meeting, government controlled financial institutions, EU markets account for an estimated €7.5 billion of the total of €15.8 billion in bonds issued by Russian public financial institutions during 2013.

This weeks meeting of EU ambassadors marks the first time that diplomats have met to formally discuss such a broad the base list of possible sanctions against Russia, and there are various economic sectors, which is seen as a direct response to Moscow’s intervention in the Ukraine crisis.

Most economic commentators expect that any form of the capital markets ban will be extremely unlikely as it would require the unanimous of all 28 EU member countries. Since the crisis between Russia and the Ukraine got underway in the spring of this year, when it has come to applying any form of sanctions, a number of EU member countries have indicated their reluctance to import a wide-ranging sanctions.

Other sanctions possibly on the list to be discussed is the proposed restriction on exporting “sensitive technologies”, from EU member countries into Russia which is liable to include much-needed elements required by Russia’s cash rich energy sector.

Photo credit: 350.org on Flickr

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