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Monday, March 03, 2014

EU sanctions on Russia: Who would they hurt most?

EU sanctions on Russia: Who holds the key?
EU foreign ministers are meeting today to decide what pressure to put on Russia. However, although trade and economic sanctions have been discussed in the US, the EU is less than enthusiastic. Under the EU treaties trade sanctions are decided unanimously, so all EU states will have a say - and for those wishing to take a harder line, the EU does not hold all the cards.

On paper the EU has a strong hand with Russia. Russia is the third largest trading partner of the EU and the EU is the largest trading partner of Russia and runs a large deficit.

Germany accounts for a large proportion
of the EU's trade with Russia (Eurostat 2013)
Of this EU/Russia trade, Germany is the most important accounting for 30% of the EU's exports to Russia. In addition, there are some states such as Finland who for historical and geographical reasons conduct a large proportion of their trade with Russia, making them vulnerable to an East/West showdown. Through their banking systems, Cyprus and the UK also have important financial and investment links with Russia and Russian individuals.

However, there is another important factor that counts against the EU. For although the EU is a large trading partner, 80% of the EU's imports from Russia are energy. This dependancy is particulay acute for gas - as you can see from the chart below, the Baltic States, the Finns, Czechs, Slovaks and Bulgarians are, according to Eurostat, 100% dependant on Russian gas. A mild winter and a relatively large European stockpile of gas means this risk is perhaps less critical than it might have been in previous years, but it could still cause them severe problems if this dispute were to escalate.


Eurostat (Oct 2012)
So will we see trade sanctions? Well probably not for the practical reasons above, but other sanctions are possible, arms embaragoes are not decided en masse so could be implemented swiftly by the UK, France and Germany. Targeted economic sanctions on individuals are also possible.

So on sanctions, an EU-US good cop/bad cop routine has an element of European self-interest to it.

18 comments:

Denis Cooper said...

I see that Eurostat has included Turkey in its chart; somebody should tell them that they're jumping the gun on that, Turkey has not yet been absorbed into the EU's "non-imperial empire".

Anonymous said...

Czechs have connection to pipelines eastwards and westwards so if there is enough Norwegian gas, it is possible to redirect. Same for Slovakia, gas can be transported in the other direction. It already happened during the last pipeline crisis UA-RU. Plus, there are new technologies - liquified gas transport? What about shale gas for the future? Russia has less and less power over us all and it will diminish with time.

Anonymous said...

> an element of European self-interest to it.

Let's leave collectivism to the European Commission and continental Europe, shall we?

There is no "European" interest here.
There is interest of each individual person and Ukraine not having anything to do with the average Jose, no sanction is in interest of average person.

I am interested in the possibility of introducing sanctions against the EU lunatics for causing this calamity. Can I ask my government to withhold my portion of this year's payment into the EU budget this year?

Rik said...

@Anonymus
Problem is there is not enough gas.
The infrastructure is there only one problem not enough gas.
Add that the problem of gas is that it is very difficult to transport (without an existing pipeline system).
Shipping is very difficult as it is gas and not fluid like oil or solid like coal.
Add on top of that for enviromental reasons Europe has been moving towards gas.

And you see that Putin has Europe firmly by the testis (which we didnot know the EU had, but apparently when you use a microscope you can find a pair).

Fracking doesnot work, the infrastructure is not ready and they havenot even started yet properly with the upstream activities.
Look at the licenses/permission dramas in the UK or with large projects as your highspeed train, takes decades with anyway an uncertain outcome.
Few tankers able to transport it (very specialised things). With probably most now longterm chartered by Japan because of Fukoshima.
Doubtful if at other gasproducers the infrastructure which is also highly specialised for eg shipping (pipelines are a complete no go) is ready for a huge capacity increase. Just look how long it took to build the thing in Quatar or now on the Russian Pacific coast.

May be this winter they can survive but next winter their testis, how small they might be, will be on the block. You simply not solve the issue of Russia being the largest supplier in a decade not even in 2.

Looks like with the Swiss we will get a lot of noise (possibly making things worse) and no real action. The EU can simply not afford anything that brings it 0.5% growth economy in problems. It only needs a minor thing to get into recession. With as added 'bonus' that the Club Med could come under attack again if that happens.

Anyway it will be pretty easy for Putin to light some fires in the ME as well anyway.

Rik said...

@anonymous2

Energy is a major weakness for the EU. And messing up the Iran dossier which might be what they are doing now is hardly helpful.
Basically the EU needs both Russia and a stable ME if there are problems with one it is likely to have several points of GDP lost.
That is why this was beyond stupidity. No use for the Ukraine (it would only be a huge financial blackhole and a place where the US could P%$$ off Russia). The EU's priority was a stable Ukraine. In an energy perspective it doesnot matter who owns the pipelines in between.
But they let themselves be torn into it by their present basketcases like Poland and some delusions of empire building and fighting for human rights.

Anyway The Crimea is lost now. And the only way to get the rest of the country quiet is kicking the Poodle and the idiots that form the present government back in their respective cages and go for more autonomy in the East at least. No funny EU membership and definitely Nato ones or Putin will likely push through. The closer Nato gets the harder the East and rest of the South will fall off (and the rubbish created in the rest of the country will increase).
And as said The Crimea is a goner. Referendum and independence probably and if not referendum and become part of Russia no other alternatives on the table anymore.
Kicking the present 'government' back in its cage is likley the only way to get the thing stable again. And it doesnot matter really who owns the pielines Russia or the EU, but it does matter that it is not owned by a group of nutcases.
Anyway both the West as Russia have the junkyard by the testis. Putin will not hesitate to use it if necessary. The West/EU should do the same it simply needs a stable (better since they messed it up an as stable as possible) Ukraine for their energy.
That is the top priority (after gayrights and animal welfare of course).

Bluffing only works if the other side thinks you have something. Pussies like Obama, Ketchup and Hague have already the disadvantages that they look like well pussies. But on top of that nobody with even 2 braincells is buying their tough talk here.
This is a mix between poker and chess. Chess as you have to see several moves ahead, each move creating a new situation and poker as people might call your bluff when that looks like now: crap.
Clear that the representatives of the West are very poor at both games.

Rik said...

On Hague.

This is file no (probably double digits) that Hague is messing up.
Basically it looks like he doesnot have any of the major calls lately right. Which is an achievement in its own right with probably just by tossing a coin you have 50/50.
Good diplomat. Horrible strategist.

What is even more worrying is that after the things are properly F-ed up, like now he simply keeps going ahead in the way that didnot work or was counterproductive.
On top of that he simply is totally unable to realise that public opinion in a lot of things have simply changed since the 80s (his style of foreign policy).
No backing in the UK for wild advantures in the ME or Eatern Europe. Likely 2/3-3/4 of the UK donot want a new member like the Ukraine into the club. And this is simply moving into that direction (at least in the people's eyes).

Anyway. He is using the same approach re the UK reneg.
Looks unable to come up with a proper agenda in the first place. One that can be used as a start for negotiations.
Takes ages to get it. If the EZ would now fall apart there might be nothing that could be brought in for the encessary treatychange.
It is not fit for purpose. As it is not a thing to start a proper negotiation with. 'Most is ok, minor adjustments here might be an improvemnt but are not really necessary' stuff.
Anyway it simply will look crap with the same 2/3 of the elctorate that simply want real change.
He is completely focussing on the other side of the table not on getting his team reelected or going for a result that can save the day. In other words simply missing the bigger picture. No use having something that is acceptable for the other side if a) your party won't be reelected as it looks crap and b) in a referendum the electorate will say it is a no go, because they find it a pile of rubbish.
Anyway even more than Cameron himself, Hague is the 'face' of getting around promises on the EU front. Which simply means credibility is already an issue.
Seems a huge mistake to let Hague coordinate this. Talks with the exception of the final horsetrading (seems completely unfit for that as well) ok. Anything with a strategic dimension a disaster in the making.

You need somebody who can write the agenda at least the draft to start with. Otherwise you run into an immigration like discussion very likely. Which is simply a waste of time and on top of that you have a deadline 2017, even an official one (unlike immigration).

He simply is a diplomat and no strategist/bigger picture guy. And definitely doesnot look able to change his role/modus operandi when circumstances demand that, he simply is always in the same mode (80s style diplomat).
Sometimes that works a lot of times it will not. The EU looks clearly one of the latter sort.

In other words Mr Hague simply looks like a huge liability in the reneg scheme. For starting things up bringing the reneg to a good result and as well sell it to the electorate anyway.
You have him coordinating things on your side and you reduce your chances of a good result enormously.

Jesper said...

Two sides of a conflict, one side appears both willing and able to use hard power while the other side is only willing and able to use soft power -> The outcome is certain, the side willing and able to use hard power will win in the short term and will continue to win as long as the contest is hard versus soft.

There are many rumours about foreign involvement in the Ukraine. If the rumours are true then some people hold positions they aren't capable to hold. We will sadly enough not find out anything about that until secrecy has been lifted, I'm guessing that will be sometime in the distant future :-(

Jim Kemeny said...

I like Denis Cooper's expression "non-imperial empire". I want to call the EU "the ramshackle empire", as a bit like the Habsburg Empire it has so many widely differing member states and ethnic groups that it can never make sensible decisions. It suffered from the joint decision trap, as Fritz Scharpf called it. This is normally so paralysing that it results in the breakup of the empire, as happened in 1919 to Austro-Hungary.

Isn't this one of the things that Open Europe criticises the EU for?

Anonymous said...

Any form of drop in EU trade is going to hurt those that are already suffering. The instability of Ukraine has given world markets the jitters and damaged the prospects of sustainable global growth. Any sane individual would have thought that the EU would concentrate on just getting the European economy back on track - but NO!

This is what you get when you have a large and out of control entity playing "The Big Game". An entity that has no democratic mandate and certainly no mandate to go 'warmongering' in nation states that are not ready for the EU and for the Euro.

I don't like Putin but what would you do when nations come to your cave and try to re-order things? Given that Russia has their Black Sea fleet parked in the Ukraine - there was no other outcome. The bear has now woken up and is, rather unsurprisingly, angry.

Who in the EU has had the authority to stir this up? Who is going to pay for this with their job etc and who will guarantee that this will not happen again?

Nobody.

Unaccountable, undemocratic, unlistening and clearly out of control with their agenda becoming clearer by the day.

When will the EU start the next European war? No more. UK out.

SC

Rollo said...

The EU has put itself in the position of being completely dependent on Russia. The Eastern part of the EU would just close down if Russia turned off the gas taps.
And if the EU wanted to act, it would need to have a common policy and leadership; it has neither.
The EU will talk the talk, persuade the poor people of Ukraine to put themselves in the firing line; but at the end of the day have nothing to offer them and will just fold up, Ashtonised.

Freedom Lover said...

The EU has imposed the global warming fantasy on its members, & also wants to extend the authority of the European Commission on Human Rights over its members & their citizens too. Yet it doesn't at present want to do anything concrete to protect the human rights of many of its neighbour (Ukraine's) citizens - or anyway those living in the western half of the country. What hipocrisy! And yet so typical of the morally bankrupt, neo-socialist non-imperial EU empire!

Denis Cooper said...

Jim Kemeny -

The description "non-imperial empire" came from Barroso:

http://www.telegraph.co.uk/news/worldnews/1557143/Barroso-hails-the-European-empire.html

Denis Cooper said...

I wonder whether the Russians might have found it somewhat provocative when Cameron went to Kazakhstan last July and said that he wanted the EU to extend from the Atlantic to the Urals?

Assuming that he knew where the Urals are, that could mean either that he wanted Russia broken up with just the European part in the EU, or failing that he wanted the NATO-backed EU to develop a southerly encirclement of Russia.

Jim Kemeny said...

Thanks, Denis Cooper, very interesting.
Thats an astonishing claim Barroso made, especially combined with the Evans-Pritchard article in 2000 on US spy chiefs and monetary union by stealth. Sweden didn't join the EU until 2005, but the key issue is that it should surely be just as easy to leave the EU as to join it. The fact that it isn't makes it much more imperialistic and prison-like.

I can't see the point of getting Russia west of the Urals in the EU and leaving the rest of Russia out. The EU does not care about geographical limits. Many want Turkey in the EU, including the power fanatics - including Bildt and Reinfeldt - no doubt because of the military muscle it adds to the EU.

Rik said...

@Denis
It is less remote than you think. Eg Kazakstan has and has had a lot of EU subsidised programms. Eg to set up its legal system according the EU standard.

Anonymous said...

When will EU realize it must break the chains to protect her own interests?

John McClane said...

This is a crisis, arguably, of the EU's own making.

And this appears to be Open Europe's only blog post about it. Accompanied, as usual, by tables and figures, demonstrating this, proving that, disproving something else.

No comment since the start of the crisis on the complete silence from Brussels, from Barroso, from Ashton, from Rompuy.

No comment on the quality of the response from European governments to the crisis.

No comment on the relevance of the Common Security and Defence Policy in all of this.

Rik said...

Looks like the story has been written.

1. Crimea will via a referendum become independent.

2. Putin will not invade the rest, unless the morons in Kiev f things up (a realistic downside risk, they are simply political unexperienced and dodgy).
Or people start to talk NATO memberships (Kiev is not the only place with morons. Apparently the jokes the Dutch and French make about the people in Belgium are well rooted in reality and so are the Seppo jokes in general).

3. Putin will keep the pressure on the rest. So basically the political split that has been there will remain that way.
And ultimately lead to either a 'third way' Ukraine or more likely a de facto split. But that is all longer term.

4. Pro forma sanctions. Putin will not be very impressed by them anyway.

5. Steinmeier (possibly Merky or Hague) will be given the honour to come to an agreement by Putin.

6. The West in other words will in order to save its face (I admit Ketchup wanting to save his sounds pretty unreal) not adress the basic issue. Which is that the political situation in the rUkraine is simply highly unstable and therefor the country itself is.
Split East West will remain. Corruption will remain only other benificiaries.
Unpallatable figures will remain on the political scene. Probably this get even worse. Current government looks totally unacceptable for the East and bringing Neo-Fascists will not do much good as well.
No structural change in the 'basics' of the economy.

7. Anyway it is another proof that if you are not braindead you donot like the EU getting involved with your foreign policy.