104263011 許宇昇

Institute of Russian Studies

EU sanctions against Russia over Ukraine crisis

Background

In March 2014, following the Ukrainian revolution in Feb, where former pro-Russia
President Viktor Yanukovych was ousted, provoking the subsequent civil conflict in
Crimea and Sevastopol, the internationally recognised Ukrainian territory of Crimea was
annexed by the Russian Federation.

Currently, the peninsula is controlled by Russia, which administers it as two federal

subjects: the Republic of Crimea and the federal city of Sevastopol, which have not been
recognized by the EU.

In response to the illegal annexation of Crimea and deliberate destabilization of a

neighboring sovereign country, the EU has imposed restrictive measures against the
Russian Federation.

the decision-making process

The imposition of sanctions falls under the CFSP domain and the process is regulated
by Articles 30 and 31 of the TEU.

1. The right to undertake initiatives lies with any member state and with the High
Representative of the Union for Foreign Affairs and Security Policy, who can act also
with the support of the European Commission.
2. The sanction proposal, which is often announced in general terms at the Foreign
Affairs Council, is discussed in greater detail by the Political and Security Committee
(PSC) and scrutinised by the competent geographical working groups of the Council
where member states delegates negotiate and decide by consensus who is to be listed
and on the basis of what statement of reasons.
3. The Foreign Relations Counsellors Working Group (RELEX) where the
representatives of EU member states negotiate the specific and concrete terms of each
and every restrictive measure.
4. The final approval through the Committee of Permanent Representatives II
(COREPER II) and the Council.

The European External Action Service (EEAS) enters the picture very early on in all
these procedures by making suggestions about what measures are advisable, whom to
target with sanctions and presenting drafts of the new legal base to be negotiated in detail
in RELEX.

The Council is the pivotal actor as it is the forum where decisions are made, even if the
enforcement of economic and financial sanctions required the direct involvement of the
Commission when sanctions affected the functioning of the internal market. However, the
Lisbon Treaty has accentuated the role of the Council which is now taking over the
implementing power that used to be exercised by the Commission; in fact, the
Commission can only suggest a draft of implementing regulation that in its view would
ensure the common implementation of the new measures throughout the Union, but it is
in the end the Council that decides and approves the regulation.

When the Council makes a decision concerning CFSP under Chapter 2, Title V of
TEU, both trade and financial sanctions require a Council regulation according to Article
215 of TFEU (financial and economic relations) to be implemented. Under this procedure
the Parliament should only be informed about the decision, but Article 75 of TFEU
establishes an exception. When the EU acts to prevent and combat terrorism and related
activities, the Council and the Parliament should adopt a regulation via the ordinary
legislative procedure.

Sanctions fall under travel bans and arms embargoes, do not need further legislation
from the EU beyond the Council’s decision (mostly common positions prior to the Treaty
of Lisbon, Council decisions since December 2009) with the exception of lists of specific
items under arms embargoes, such as dual-use items, that can be compiled by the Council
in ad hoc regulations.

Arms embargoes are an exceptional case because of a provision on national security

that has been part of the Treaties since 1957 [TFEU, Article 346]. For instance, the
Common Rules on Arms Exports approved by the Council in 2008 strictly regulate under
which terms weapons can be sold [Common Rules Governing Control of Exports of
Military Technology and Equipment, 2008/944/ CFSP] but the final word on interpreting
and deciding on each sale rests with national governments. The movement of people from
and to EU countries is in fact controlled by the national governments, responsible for
monitoring their borders and ensuring that the decisions of the Council of Ministers are
duly implemented.

Restrictive measures

Ⅰ Economic sanctions, launched on 31st Jul 2014, extended on 8th Sep

1. EU nationals and companies may no longer buy or sell new bonds, equity or similar
financial instruments issued by:

•five major state-owned Russian banks, their subsidiaries outside the EU and those
acting on their behalf or under their control.

•three major Russia energy companies.

•three major Russian defence companies.

2. Services related to the issuing of such financial instruments, e.g. brokering, are also
prohibited.
3. EU nationals and companies may not provide loans to five major Russian state-owned
banks.
4. Embargo on the import and export of arms and related material from/to Russia,
covering all items on the EU common military list.
5. Prohibition on exports of dual use goods and technology for military use in Russia or
to Russian military end-users, including all items in the EU list of dual use goods.
Export of dual use goods to nine mixed defence companies is also banned.
6. Exports of certain energy-related equipment and technology to Russia are subject to
prior authorisation by competent authorities of Member States. Export licenses will
be denied if products are destined for deep water oil exploration and production,
arctic oil exploration or production and shale oil projects in Russia.
7. Services necessary for deep water oil exploration and production, arctic oil
exploration or production and shale oil projects in Russia may not be supplied, for
instance drilling, well testing or logging services.

Ⅱ Asset Freezes and Visa Bans, launched on 16th Feb 2015

Asset freezes and visa bans apply to 151 persons while 37 entities are subject to a freeze
of their assets in the EU. This includes 145 persons and 24 entities responsible for action
against Ukraine's territorial integrity, six persons providing support to or benefitting
Russian decision-makers and 13 entities in Crimea and Sevastopol that were confiscated
or that have benefitted from a transfer of ownership contrary to Ukrainian law.

Outcomes

Effect on Russia
The combined effect of the sanctions and the rapid decline in oil prices in 2014 has
caused significant downward pressure on the value of the ruble and flight of capital out of
Russia. An analysis of recent data confirms Russia’s entry into a recession, with negative
GDP of -2.2% for the Q1 of 2015, compared to the first quarter of 2014. By Q2, it had
plunged to -4.6%, which has indicated the prominent effect of international sanctions
implemented against Russia.

Effect on EU states
It is inevitable that the loss of the Russian market, as a result of EU sanction, could
impact economic growths, leading to unemployment in the EU and non-member
Switzerland over the next few years.

According to a study released by the independent Austrian Institute of Economic

Research in Vienna (WIFO), Germany would be one of the biggest losers in terms of
jobs, as reduced trade with Russia could put 465,000 German jobs in jeopardy, while
Poland would be second, Italy is the third, Spain and France are also in the top five,
WIFO estimate that the UK could lose around 110,000 jobs.

In terms of export revenue, Germany is the major European economy which would be
most affected with a possible loss of 1.6% over the next few years, while Italy, Spain,
France and the UK would each lose less than 1%.

Smaller countries however are likely to be much worse affected, with Estonia feeling
the greatest hit relative to its size. It's projected to register an almost 16% drop in revenue
from exports compared to 2013, before any sanctions were imposed.

Some countries leaders, such as Hungary, Bulgaria, Greece, have admitted the
subsequent negative impacts on economy, and warned to seek alternatives instead of
continuing the restrictive measures. Nevertheless, EU has extended the policy, which was
due to expire on 15th Sep 2015 by six months until 31st January 2016.