EU approves new Crimea sanctions targeting Russia

A file picture taken on May 9, 2014 shows Russian President Vladimir Putin as he speaks during his visit to the Crimean port of Sevastopol. -- PHOTO: AFP
A file picture taken on May 9, 2014 shows Russian President Vladimir Putin as he speaks during his visit to the Crimean port of Sevastopol. -- PHOTO: AFP

BRUSSELS (AFP, Reuters) - European Union governments adopted tighter restrictions on European investment in Crimea on Thursday, targeting Russian Black Sea oil and gas exploration and tourism, an EU official said.

The move serves to force home the message the bloc will not recognise Russia's "illegal annexation" of Ukraine territory.

"The annexation is illegal and what we are doing is part of the non-recognition" policy, European Commission spokeswoman Maja Kocijancic said, calling on Russia to help end the Ukraine crisis which has cost more than 4,600 lives since Moscow seized Crimea in March.

The new restrictions, approved by the EU's 28 governments just before the bloc's leaders discuss the Ukraine crisis and relations with Russia at a Brussels summit, will take effect on Saturday, the official said.

The sanctions were first introduced in March, after Russia annexed Crimea from Ukraine, and were stepped up in July, after Malaysia Airlines flight MH17 was shot down over eastern Ukraine, allegedly by pro-Russia rebels using Russia-supplied arms.

The EU leaders meeting at a summit in Brussels will also back a huge 315-billion-euro (S$510-billion) investment plan aimed at kickstarting Europe’s stalling economy, although pledges of hard cash are expected to be lacking.

The first summit led by new European Council president Donald Tusk, Poland’s Kremlin-wary former premier, comes against a backdrop of the collapse of the rouble amid western sanctions and a drop in oil prices. “The Russian economic situation will be in everyone’s minds,” a European diplomat said.

German Chancellor Angela Merkel said before heading to Brussels that Western sanctions against Russia remain “unavoidable” until President Vladimir Putin allows a free, united Ukraine. “The goal of our actions is and will remain a sovereign and territorially intact Ukraine that can decide its own future,” said Merkel, a frequent interlocutor with Putin who has taken a tougher tone recently. “Until we reach that goal... sanctions remain unavoidable,” she said.

Hours later, the EU officially approved additional sanctions on Crimea, the Ukrainian peninsula annexed by Moscow in March, banning all investment, restricting trade and even banning cruise liners from docking to shore.  The sanctions were drawn up by ministers in the run-up to the summit.

‘DON'T WANT TO PROVOKE PUTIN’

But given the effect on their own economies of the recent collapse of Russia’s currency, leaders at the summit are wary of expanding sanctions as they did after the shooting down of MH17 Malaysia Airlines flight in July.

The EU “is not in a hardening mindset,” another diplomat said, while another added: “We don’t want to provoke Putin too much.”

Hungarian Prime Minister Viktor Orban – who has traditionally been closer to Putin and whose country counts Russia as its largest trading partner – said Moscow’s currency crisis was a concern.  “The weakening of the Russian currency negatively affects the Hungarian economy,” Orban told a press conference in Budapest on Thursday. “Along with the EU sanctions, it gravely affects the Hungarian exports to Russia.”

Western powers have repeatedly accused Russia of stoking the Ukraine crisis, which has killed at least 4,700 people and displaced close to one million, by supplying weapons and troops to the rebels – which Moscow denies.

Putin appeared in no mood to compromise as he gave a press conference at the same time as EU leaders headed for Brussels. He accused Western powers of trying to tear out the claws and teeth of the famed Russian “bear” and “make a stuffed figure out of it” – while branding Ukraine’s attempt to crush the separatist uprising as a “punitive operation”.

INVESTMENT PLAN

In a statement before the summit, Tusk said: “The crisis in Ukraine remains a serious concern.... It is therefore important that we come out of this meeting with a clear political message.” The EU, which has already spent US$1.6 billion (S$2 billion) on rescuing effectively bankrupt Ukraine, will reiterate that it is ready to do more, but only in return for reforms.

Also on the table will be Juncker’s investment plan to revive the bloc’s stalling economy, a plan that seems to have pitted Brussels against European governments who want backing for huge infrastructure plans.

On the eve of the summit, the head of the EU’s executive branch urged EU leaders to open their wallets and add to the seed money that will be put in place over the next few months to launch the investment plan. “I now wait for concrete proposals and not just ‘talk-talk’. I need ‘money-money,’ hard cash now,” Juncker said.

Meanwhile Tusk, a veteran of summits which he attended for seven years as Poland’s prime minister, wants to break with the style of previous gatherings.  If all the subjects are wrapped up, the meeting could end Thursday evening, a first for European summits which often stretched late into a second day at the height of the eurozone debt crisis.