An emergency meeting was held in Brussels on Thursday, in response to the shelling of the government-held port of Mariupol in Eastern Ukraine and the escalation of fighting in the Donetsk and Luhansk regions of the country.
At Thursday's meeting it was agreed that sanctions imposed on Russia’s energy, defence and banking sectors in July 2014, due to expire in March 2015, should be extended for six months. Some ministers also pushed for further 'restrictive measures', or sanctions, but no agreement could be reached on these. Ministers did agree to discuss names to add to the list of individuals targeted for EU travel bans and asset freezes.
Sanctions expert Tom Stocker of Pinsent Masons, the law firm behind Out-Law.com, said that existing sanctions are already very effective, and are having a significant impact on the Russian oil and gas sector (and the European companies that historically supply that sector) , and on a number of Russian state owned banks' ability to raise funds.
The original sanctions, and updates made in September 2014, have been problematic for European Union companies, Stocker says. "They were put in place very quickly and without a significant amount of legislative scrutiny, so there are aspects of the Regulations that can be difficult to interpret and apply to the circumstances that companies face. The European Council regulations - there are several different regulations applicable to Russia, Crimea and Ukraine - have been brought in, or amended, overnight so companies can be trading lawfully one day and then have to stop the next. I'd encourage the European Council and European Union to consult and take more time to get any new sanctions right. It is also important that explanatory guidance from the European Commission and the UK regulators is issued at the same time as the sanctions are imposed rather than weeks or months afterwards."
Stocker said that, while the sanctions imposed have had a significant impact, particularly on the oil and gas and banking sectors, many Russian related transactions are not subject to the sanctions. Also, transactions that are the subject of the sanctions could sometimes proceed under licences granted by the Export Control Organisation (ECO).
From a practical perspective, another difficulty is that ECO is under-resourced and the licence application system is designed for export control applications rather than applications for licences to provide financing. This is causing delays, he said. .
"The licensing process is cumbersome and can take a considerable amount of time – sometimes six weeks or more, in my experience.," Stocker said.
This week's announcement is not conclusive, and the proposed sanctions will be discussed again at an EU summit to be held on February 12.
The US, which has previously coordinated sanction decisions with Brussels, said it was not planning any new announcement.
