EU targets bank loans, World Cup in Russia sanctions talks

BRUSSELS - EU ambassadors are holding talks in Brussels on new proposals for Russia sanctions - seen by EUobserver - with ideas including “action” to block its 2018 World Cup.

The talks are taking place amid news of a “ceasefire process” agreed between Kiev and Moscow, which EU diplomats regard with caution.

According to an options paper tabled by the European Commission and the EU diplomatic service, "there are two possible avenues for stepping up economic pressure" to make Russia cease hostilities.

The paper says the EU can deepen existing sanctions or expand them to new economic sectors.

But it recommends the first option beacuse it can be adopted more quickly and because it will increase the "effectiveness" of existing mesures.

It also says option one “reinforces the point that EU sanctions are directed at promoting a change of course in Russia's action in Ukraine and are not a tit for tat against Russia's restrictive measures on the EU."

The paper suggests EU countries should expand the current ban on purchasing bonds from big Russian state banks to a ban on taking loans. It says the maturity threshold of forbidden bonds should go down from 90 to 30 days and that other types financial products (derivatives) should also be listed.

The financial measures are to be linked with the existing EU ban on exports of arms and oil-drilling technologies.

The paper says there should be no "debt financing through bonds, equities and syndicated loans" to Russian state-owned defence companies and oil exploration firms.

It notes that the embargo on dual-use goods, which currently applies to Russian military end-users, should be expanded to civlian ones as well.

It names "high performance computers", "quantum key distribution systems", "special materials" and "machine tools" as relevant items.

It adds that EU firms should stop providing “future associated services” to Russian oil firms, in areas including: seismic services; drilling; well-testing; supply of floating vessels for deep water oil exploration and production; Arctic oil exploration and production; and shale oil projects in Russia.

It proposes expanding an existing blacklist to persons and companies involved in fighting in the Donbass region in east Ukraine, but it does not mention names, which are to be provided by the ambassadors.

In a more creative turn, the EU paper also says that EU countries and their G7 allies (Canada, Japan, and the US) should consider “taking co-ordinated action within the G7 and beyond to recommend suspension of Russian participation in high profile international cultural, economic, or sports events (Formula 1 races, UEFA football comeptitions, 2018 World Cup etc).”

This sports idea is a British one, with UK diplomats already pushing for it last month, when pro-Russia rebels shot down the Malaysia Airlines flight MH17.

The EU paper concludes that in the event of a "major escalation" the existing sanctions will be broadened to new economic sectors.

EU leaders at a summit last weekend tasked the EU institutions to draw up plans which are to be adopted on Friday if Russia does not back off.

They did it after Russian troops and tank columns began fighting alongside pro-Russian rebels in east Ukraine and after Russian leader Vladimir Putin boasted he could conquer Kiev in “two weeks” if he “wanted to”.

The ambassadors’ talks began after Ukrainian president Petro Poroshenko announced earlier on Wednesday that he had agreed a “ceasefire” with Putin by phone.

But Russia later quashed the news, saying it cannot agree a ceasfire because it is not a party to the conflict.

One Brussels-based diplomat told EUobserver the sanctions blueprint will "largely remain as it is" before adoption at the end of the week.

A Kiev-based EU diplomat said Poroshenko was “tricked by the Russians into making the announcement - this just gave them another chance to deny involvement in the conflict”.

Russia one month ago reacted to the first raft of EU economic sanctions with a ban on EU fruit, vegetable, dairy, and meat products.

EU agriculture commissioner Dan Ciolos on Wednesday said the ban "affects Russian consumers more than EU producers”.

He also indicated that EU farmers may receive compensation and that the commission is working to stabilise food prices in Europe, ahead of a snap meeting of EU agriculture ministers on Friday.