Business New Europe/RIA Novosti: European Commission to level new sanctions on Friday

(Business New Europe – bne.eu/RIA Novosti – September 3, 2014) The European Commission suggests limiting Russian state-owned companies’ access to European capital markets, as it prepares to possibly impose new tougher sanctions on Russia at a meeting on Friday, September 5.

According to agency statements, the new economic sanctions against Russia, proposed by the European commission, include limiting the access of Russian state corporations to European capital markets and reducing the minimum maturity of Russian state-owned banks’ debt instruments that not cannot be sold in the EU to 30 days from the current 90. The European Commission also suggests considering a ban on buying Russian derivatives.

A list of possible measures was leaked by the EU and contains the following:

* Sports/cultural/economic ban for Russia – presuming risking the FIFA World Cup.

* Expanding the list of individuals on list of those sanctioned – extending to Sergei Shoigu, the Russian defence minister – what, he was not already on the list?

* Extension of ban on selling advanced energy tech, to servicing agreements;

* Complete export ban on goods which can have dual military/civilian roles – presumably a challenge for the aircraft industry.

* Limiting new financing in the EU for state owned banks from anything over 30 days (as opposed to 90 day ban at present);

* Banning syndicated loans/borrowing for all SOEs, and not just banks.

Separately this week there has been rumour/talk of restricting Russian access to SWIFT, and also placing restrictions on EU entities participating in Russian sovereign debt issuance.

Tim Ash said in a note: “This seems to be a bit of a pick n’ mix with some stuff proposed by member states and some by the commission. The EU is talking about coordinating all this with other G7 member states, but basically the leak seems to be putting this all out for “debate” with a decision taken this week (Poroshenko has spoken of sanctions being somehow linked to implementation of his peace plan).”

As for the defence sector measures, the Commission suggests that the EU expands the export ban on military equipment to include the dual, military and civilian, use goods.

Earlier on Tuesday, Italian Prime Minister and next EU High Representative on foreign and security policy Federica Mogherini announced that the European Union will make the final decision on sanctions against Russia on September 5.

Relations between Russia and the West have deteriorated with the escalation of the Ukrainian crisis, as western governments imposed economic sanctions on Russia, accusing Moscow of aiding independence supporters in eastern regions of the country. Russia retaliated to the western sanctions by imposing a year-long ban of food imports from the European Union, the United States, Canada, Australia and Norway.

In the last few weeks, the possible imposition of new sanctions has been widely discussed by European politicians and during the EU Summit in Brussels it was decided that the EU will come up with new sanctions within a week.

On Monday Russian President Vladimir Putin expressed hope that common sense would prevail on Western sanctions. The same day, Russia’s Foreign Minister Sergei Lavrov said Russia would have to respond on the new Western restrictions, should they follow through with the sanctions.