GERMANY/EU/UKRAINE: Fine-grained response likely to Crimean referendum

Russian Naval Vessel in Ukrainian Port

(Business News Europe – bne.eu – Teneo Intelligence – March 13, 2014)

In response to the Crimean referendum, the EU will likely move to level two of its sanctions menu.

Asset freezes and travel bans will be applied only gradually, amid German unwillingness to escalate to broader economic measures.

No quick fix to the crisis is expected by Berlin, amid concerns not only over Putin but also over Kiev.

The likely vote in favour of Crimean unification with the Russian Federation on Sunday (16 March) will be the main issue preoccupying the European Union’s (EU) Foreign Ministers’ meeting in Brussels on Monday. In accordance with the gradual, three-stage approach agreed by the EU’s heads of state and government last week, the referendum will likely trigger stage two of the sanctions menu, in which the immediate termination of talks on a new EU-Russia visa agreement (stage one, last week) will be amended by the EU moving towards travel bans and asset freezes for select Russian nationals.

However, the EU will likely continue to further fine-grain its next responses. A bold leap towards a broad application of asset freezes and travel bans is probably not in the cards on Monday. For instance, a selective interpretation of the term “those responsible for actions which have undermined Ukraine’s integrity” might be chosen. As a result, the sanctions are likely to target individuals close to Russian President Vladimir Putin, including from the security services and the political and military establishment. Additionally, the EU might follow up relatively soon on its promise to speed up talks about the political part of the Association Agreement with Ukraine in order to send a message of support.

One key reason for this pragmatic strategy is that Berlin remains fundamentally opposed to nearing the third level of EU measures, which would entail economic sanctions. Germany’s and Eastern Europe’s dependence on Russian oil and gas, as well as the generally ever-closer economic ties between the bloc and Russia are one reason for the German positioning. Another point is the German conviction that talking channels with Moscow will have to remain open if a solution is tobe achieved at some point.

Support in Central and Eastern Europe is key

In order to retain credibility with Western partners, the German strategy is not to outright oppose the application of sanctions, but to continue utilising a piecemeal approach, in order to prevent an escalation towards economic measures. The argument brought forward by Berlin is that Putin was only waiting for a further escalation of the crisis. The Kremlin knows that no side will seek military confrontation, that EU and NATO partners will take time to coordinate their position, and that nationalist feelings in Russia could, at least in the short term, gloss over the effect of economic sanctions.

Meanwhile, Berlin has no illusions about the time horizon for a potential easing of tensions. German foreign policy-makers believe that as of now, Putin has no incentive to cave in, given the wave of popular support he has been enjoying on the back of the crisis. On the flipside, Berlin views key US policy-makers as having little skin in the game given the small economic ties between the US and Russia. They also believe that Washington is generally driven by global-strategic considerations, in which Berlin is largely uninterested given the very real problems the on-going crisis is posing in Central and Eastern Europe. It is among Germany’s partners in this region that Berlin is confident it can win support for its gradual, pragmatic approach to handling Putin. This rationale also explains the recently dense travel schedule of Chancellor Angela Merkel and especially Foreign Minister Frank-Walter Steinmeier.

Handling Putin, managing Kiev

In terms of potential outcomes of the crisis, the German government is convinced that the longer the confrontation drags on, and with the West very gradually expanding its sanctions menu, Moscow will eventually have to accept Berlin’s demand of talks in a contact group. This counts especially in light of Moscow’s usual insistence on and record of compliance with international law, as well as the view in Berlin that other UN Security Council members with territorial disputes –such as China with Taiwan– will ultimately have little interest in legitimising the precedent set by Moscow’s dubious Crimea referendum. At the same time, Berlin is convinced that regardless of the referendum, Moscow will this time go further than in the case of South Ossetia and Abkhazia back in 2008. In this sense, the full integration of Crimea into the Russian Federation –rather than just a de-facto annexation– is the baseline scenario in the eyes of German officials.

Against this backdrop, managing the divergent groups backing the new Ukrainian government is at least as challenging a task for Berlin as handling Putin. Key figures of post-revolution politics in Ukraine, including Yulia Timoshenko, continue to wield at best very little credibility in Berlin. In the eyes of the German government, this not only raises the problem of negotiating between Kiev and Moscow, but also greatly increases the risk of further difficulties with organising help from international donors and IMF.

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