Will European Sanctions on the Russian Federation Bite?

Ukrainian Military Forces servicemen of the 92nd mechanized brigade use tanks, self-propelled guns and other armored vehicles to conduct live-fire exercises near the town of Chuguev, in Kharkiv region, Ukraine, on Feb. 10, 2022. (Sergey Bobok/AFP via Getty Images)

Commentary

As expected, the European Union (EU), like Australia, the United Kingdom and the United States, has imposed draconian sanctions on the Russian Federation to punish it for invading Ukraine.

The sanctions, which cover the fields of finance, energy, transport, technology, and visa policy which targets Russian oligarchs, but not ordinary Russian citizens will have the effect of freezing Russian financial assets throughout the territory of the EU. While Russia’s access to Europe’s financial markets will be denied as part of what EU foreign policy chief, Josep Borrell, described as “the strongest, the harshest package ever considered.”

The financial sanctions even include the exclusion of selected Russian banks from access to SWIFT, the global interbank payment system; this will undoubtedly have significant consequences for the trading ability of Russia.

The European Council also closed the European airspace to Russian planes. It has even been suggested that European Membership candidacy should be awarded to Ukraine, but there may be some pushback on that idea from within the EU itself.

On Feb. 25, the European Council also decided to freeze the assets of Russia’s President Vladimir Putin and his Minister of Foreign Affairs, Sergey Lavrov. Such a move is unusual because it might frustrate efforts to rekindle intergovernmental negotiations.

Nevertheless, the Foreign Minister of Australia, Marise Payne, has indicated, on Feb. 26, that she too is seeking advice on the imposition of sanctions on Putin and Lavrov.

The freezing of their assets is not likely to perturb these Russian oligarchs because they are very wealthy individuals and, in any event, might be driven by a perverse belief in the justice of their cause.

In addition, the EU also imposed restrictive measures on the members of the National Security Council of the Russian Federation and members of the Duma, the Russian Parliament, who voted for the recognition of the breakaway “republics” in East Ukraine.

Lawmakers applause during a speech of German Chancellor Olaf Scholz on the Russian invasion of Ukraine during a meeting of the German federal parliament, the Bundestag, at the Reichstag building in Berlin, Germany, on Feb. 27, 2022. (Hannibal Hanschke/Getty Images)

To understand what is happening in Ukraine, it is important to consider that, certainly since the integration of the Crimea and Sevastopol regions into the Russian Federation in 2014, the EU has intensified its efforts to entice Ukraine into the European family.

The EU is strengthening its ties to Ukraine by assisting its government in the modernisation of the country. Specifically, the relationship between the two is governed by the EU-Ukraine Association Agreement, which includes a Deep and Comprehensive Free Trade Area (DCFTA). The Association Agreement, signed in 2014 and in force since 2017, is based on “shared values and commitment to respect for democratic principles, the rule of law, good governance, human rights, and fundamental freedoms.”

The long-term aim of DCFTA is to facilitate the economic development of Ukraine and to strengthen its political ties with the EU. It provides the framework for “economic development by opening up markets and harmonising laws, standards and regulations in various sectors” which will facilitate the alignment of “key sectors of the Ukrainian economy with EU standards.”

It is obvious then that this agreement benefits Ukraine because it offers its businesses “stable and predictable preferential access to the EU market, the largest market in the world, with over 500 million consumers.” At present, the EU is already the main trading partner of Ukraine, representing around 45 percent of its total trade, worth more than 40 billion Euros.

At the same time, the North Atlantic Treaty Organisation (NATO) is seeking to enlist Ukraine as a member. Ukraine, itself, has indicated a willingness to join this defence Alliance.

Undoubtedly, a Western-dominated military presence at Russia’s doorstep would be considered by Putin as a threatening and hostile situation. Hence, Russia sought but did not receive, written guarantees that Ukraine, Georgia, and Belarus would never become members of NATO.

Of course, there is no doubt that the situation in Ukraine is grave. It is the second major war in Europe since World War II hostilities ended on May 8, 1945—the break-up of the former Yugoslavia in the 1990s was the first.

It is difficult to see what else, bar direct military involvement, could have been done by the EU in response to the start of hostilities in Ukraine.

A boy plays on a swing in front of a damaged residential block hit by an early morning missile strike in Kyiv, Ukraine, on Feb. 25, 2022. (Chris McGrath/Getty Images)

This conflict is extremely worrying because it could easily become an uncontrollable conflagration, involving more countries. NATO, the European Union, and the U.S. supply weapons to Ukraine; this could well be regarded by Russia as a provocation, which in turn might result in a widening of the conflict.

It is doubtful that the European sanctions will have the desired impact. There are at least four reasons that support this view.

First, sanctions, especially those of an economic nature, take a long time to become effective, and these would have been factored in by Putin before embarking on his calamitous military misadventure.

Second, inevitably, the sanctions would result in tit-for-tat retaliation by the Russian Federation. Indeed, Russia would appropriate the EU’s sizable investments in Ukraine. The volume of direct investment, including equity capital, into Ukraine’s economy from the EU countries at the end of Dec. 2018 already stood at $24.7 billion (A$34.3 billion).

Third, Putin built an alliance with the People’s Republic of China that would enable him to avoid the worst consequences of the boycotts and sanctions, using the offices of his newfound Chinese friends.

But finally, dissensions within the ranks of the EU itself might manifest themselves over the next couple of months, revealing disagreements about how to deal with the Ukrainian crisis.

If the EU’s response to the crisis was to award EU candidacy status to Ukraine, as has already been suggested by the leaders of Poland and Lithuania, the present situation could soon become a wider war. Also, any attempt by NATO to offer membership of the defence organization to Ukraine would function as a red flag waved in front of a bull.

Only a willingness to negotiate a ceasefire, followed by a rational discussion and consideration of the relevant issues at an intergovernmental conference might offer a way out of the nightmare that is unfolding in Ukraine.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.