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Ukraine and Russia: EU restrictive measures - European Scrutiny Committee Contents


1 Ukraine and Russia: EU restrictive measures


Committee's assessment Politically important
Committee's decisionNot cleared from scrutiny; for debate on the floor of the House
Document detailsFurther restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine (36262), (36263), (36264), (36265)
Legal baseArticle 29 TEU; unanimity and Article 215 TFEU; QMV
DepartmentForeign and Commonwealth Office

Summary and Committee's conclusions

1.1 On 18 July 2014, the EU agreed to expand the listing criteria for Ukraine sanctions, allowing for the targeting of Russian nationals whose actions undermine the sovereignty and independence of the Ukraine — which, as the Minister puts it, "now allows the EU to target individuals and entities with close ties to Vladimir Putin".

1.2 The Minister notes that eight individuals were listed under these expanded measures on 30 July 2014, including the Deputy Chief of Staff of the Presidential Administration; individuals connected with the self-styled "Lugansk People's Republic" and "Donetsk People's Republic"; the self-styled "Minister of Interior of the Republic of Crimea"; a major shareholder in a company which has secured a contract to build a bridge from Russia to the Crimea "and has been long-favoured by Putin during his tenure"; an individual with close links to Ukraine separatists; and "key shareholders of Bank Rossiya, a bank with close ties to senior Officials of the Russian Federation and who have opened branches in Crimea since the annexation".

1.3 Three entities were also listed under the expanded measures.

1.4 In addition to these new listings, the Council agreed on 29 July a package of economic sanctions measures against Russia, which came into effect on 1 August 2014 and will remain in place until 31 July 2015, with an initial review of measures due no later than 31 October 2014. Prohibitions encompass:

—  the export to and import from Russia of arms and related material of all types, including Dual-Use technology, and the provision of related technical or financial assistance;

—  the export of technologies and related technical or financial assistance for deep water oil exploration or production, arctic oil exploration or production and shale gas projects in Russia; and

—  the direct or indirect purchase or sale of bonds, equity or similar financial instruments with a maturity exceeding 90 days, and issued after 1 August 2014, if involving a major credit or finance development institution established in Russia with over 50% public ownership or control, or involving any legal person, entity or body acting on behalf of, or owned outside the Union more than 50% by, certain organisations.[1]

1.5 The Minister concludes thus:

    "Although the practical impact of these measures cannot yet be assessed, as a whole they send the message that the UK and the EU will not accept the efforts of Russia to destabilise and undermine the sovereignty of the Ukraine. The additional listings seek to target individuals and entities close to Vladimir Putin, in a bid to increase the pressure on those with influence at the top. The embargo will ensure that the EU plays no inadvertent role in facilitating the supply of goods which could contribute to Russia's efforts to support separatists in the Ukraine. The areas of the embargo targeting shale gas projects and oil exploration & production will ensure that the long-term development of Russia's oil sector is slowed by the denial of vital technology from the EU and other countries imposing similar measures. The financial measures are designed to raise the cost of borrowing in Russia, for state corporations and others."

1.6 In 2005, then UN Secretary General Kofi Annan described economic sanctions as a "vital tool" in dealing with threats to international peace and security and "a necessary middle ground between war and words". Words have failed thus far; and war is not an option.

1.7 Yet, in the face of swift Russian retaliation affecting EU (and US) food exports to Russia (of which the Minister makes no mention) there has been immediate EU wobbling: on 14 August, the Slovak prime minister, Robert Fico, described EU sanctions against Russia as a "meaningless gesture that would hit growth prospects", and asked:

    "Why should we jeopardize the EU economy that begins to grow? If there is a crisis situation, it should be solved by other means than meaningless sanctions."

    "Who profits from [the] EU economy decreasing, Russia's economy having troubles and Ukraine economically on its knees?"[2]

1.8 At the same time as the imposition of these sanctions (now in both directions), Belarus President Lukashenko, along with Kazakhstan President Nazerbayev, hosted a meeting on 26 August between President Putin and President Poroshenko. They also invited the EU High Representative for Foreign Affairs and Security Policy and Vice-President of the Commission (Baroness Ashton) and the EU Commissioners for trade and energy to participate.

1.9 In their subsequent remarks to the press, the HR emphasised that the focus of their concern was "the territorial integrity and sovereignty of Ukraine, the importance of the peace and security discussions", and "the economic aspects of the discussions between the different nations, especially between Russia and Ukraine and of course the role of the European Union". In this regard, the energy Commissioner noted:

    "We have long-term relations between the EU and Kazakhstan, looking to oil. We have a transit function, which is for Ukraine and Belarus. And we have oil, gas and coal coming from the Russian Federation to the European Union's markets.

    "Our main concern, no doubt, is gas. We have on-going bilateral and trilateral contacts and talks and negotiations between the Russian Federation and Gazprom on one hand and Ukraine and Naftogaz and our European Commission. Today we agreed to continue to have formal trilateral contacts, and on Friday we will be in Moscow to prepare for the next trilateral consultation between the Russian Federation/Gazprom and Ukraine/Naftogaz with the EU as a moderator of important process.

    "Our ambition was and is to avoid any problems in the next months linked to the security of supply: gas for everybody in the EU28, plus the Western Balkan states, plus Ukraine and Moldova is our ambition. Therefore, we have to do something, and my proposal was to come to an interim solution."[3]

1.10 What that might be remains to be seen. In the meantime, the latest Fitch Ratings assessment of 26 August says:

    "Europe is unlikely to be able to reduce its reliance on Russian natural gas for at least the next decade and potentially much longer."[4]

1.11 This is by common consent the worst crisis in the West's relations with post-Soviet Russia, and at present there is no sign of its ending: on the contrary. We are surprised, and disappointed, that the Minister's Explanatory Memorandum takes no cognisance of the wider considerations driving EU policy.

1.12 There is no mention of the shooting down of flight MH 17, killing all 298 passengers and crew, in which Russian-supplied Buk surface-to-air missiles are widely seen as having been used; which horrified world opinion; and which presumably was a key factor in the EU's determinations. There is also no mention of the continued fighting in eastern Ukraine, or Russia's role in it — which in President Obama's case, as of 28 August, is unqualified: "Russia is responsible for the violence in Ukraine".[5] Since then, President Putin has talked of "statehood" for the two eastern provinces of Ukraine in question, and referred to them as "Novorossiya".

1.13 Also notable by its absence is any mention of the widespread discussion of how the Western alliance as a whole should respond. As we have noted before, EU restrictive measures against Ukraine and Russia are not free-standing, but form part of a much wider discussion about the appropriate policy responses by the West collectively — characterised by "The Times" on 1 September as, thus far, one of "shameful languor". Hitherto, there has been talk of the prospective deployment of a "full battle group" of 1,350 UK military personnel for exercises in Poland in October; the possibility of the forward-basing of military assets there and in the Baltic states; possible new NATO "emergency" and rapid reaction forces, of 5,000 and 10,000 troops respectively; even the revival by Ukraine's prime minister of Ukraine's possible membership of NATO. These will no doubt be the focal points of the NATO Summit that is to be held in Wales later this week, on 4-5 September.

1.14 We accordingly recommend that these latest EU measures be debated on the floor of the House, and that this debate should also be used to examine what other measures have been agreed or are in prospect in the aftermath of that Summit.

1.15 The Minister will be aware of the disagreement between the Committee and him when we last recommended such a debate. It will be clear that there is no question now his arguing that it is a question of examining the technicalities of the latest EU restrictions — the reason why, he said, the Government insisted in a debate in European Committee[6] — but of the wider context and the way forward.

1.16 The Minister will also no doubt recall how long it took the Government to arrange that earlier debate: recommended by the Committee on 26 March, but (despite several subsequent reminders) not held until 2 July. We urge the Government to schedule this debate as soon as possible, and certainly no later than immediately after the House returns from the conference recess.

1.17 We are also drawing this chapter of our Report to the attention of the Foreign Affairs Committee.

1.18 In the circumstances outlined by him, we do not object to the Minister having over-ridden scrutiny, and now clear the Council Decisions, Council Implementing Regulation and Council Regulation.

Full details of the documents: Council Decision 2014/508/CFSP of 30 July 2014 amending Decision 2014/145/CFSP concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine: (36262),—;Council Implementing Regulation (EU) No.826/2014 of 30 July 2014 implementing Regulation (EU) No. 269/2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine: (36263),—; Council Decision 2014/512/CFSP of 31 July 2014 concerning restrictive measures in view of Russia's actions destabilising the situation in Ukraine: (36264), —; Council Regulation (EU) No. 833/2014 of 31 July 2014 concerning restrictive measures in view of Russia's actions destabilising the situation in Ukraine: (36265), —.

Background

1.19 The European Union says that it is "focusing its efforts on de-escalating the crisis in Ukraine" and:

    "calls on all sides to continue engaging in a meaningful and inclusive dialogue leading to a lasting solution; to protect the unity and territorial integrity of the country and to strive to ensure a stable, prosperous and democratic future for all economic and political reforms."[7]

1.20 An extraordinary meeting of the Council of the European Union on 3 March 2014 :

    "condemned the clear violation of Ukrainian sovereignty and territorial integrity by acts of aggression by the Russian armed forces as well as the authorisation given by the Federation Council of Russia on 1 March for the use of the armed forces on the territory of Ukraine."[8]

1.21 The EU called on Russia:

    "to immediately withdraw its armed forces to the areas of their permanent stationing, in accordance with the Agreement on the Status and Conditions of the Black Sea Fleet stationing on the territory of Ukraine of 1997."[9]

1.22 On 5 March 2014, the EU adopted sanctions focused on the freezing and recovery of misappropriated Ukrainian state funds, targeting 18 persons identified as responsible for such misappropriation and freezing their assets within the European Union.

1.23 In a statement of the Heads of State or Government following an extraordinary meeting on 6 March, the EU:

    "underlined that a solution to the crisis must be found through negotiations between the Governments of Ukraine and the Russian Federation, including through potential multilateral mechanisms. Having first suspended bilateral talks with the Russian Federation on visa matters and discussions on the New (EU-Russia) Agreement as well as preparations for participation in the G8 Summit in Sochi, the EU also set out a second stage of further measures in the absence of de-escalatory steps and additional far-reaching consequences for EU-Russia relations in case of further destabilisation of the situation in Ukraine."[10]

1.24 In the absence of de-escalatory steps by the Russian Federation, on 17 March the EU adopted the first set of restrictive measures against persons responsible for actions which undermine or threaten the territorial integrity, sovereignty and independence of Ukraine as well as persons and entities associated with them. In this regard, 21 persons were identified and targeted with a travel ban and a freeze of their assets within the EU.

1.25 On 21 March the EU strengthened its sanctions in this regard with additional measures against a further 12 individuals. The EU also strongly condemned the holding of an illegal "referendum" in Crimea on joining the Russian Federation, and does not recognise the "referendum" or its outcome.

1.26 Following the 14 April Foreign Affairs Council, the EU called on Russia to repudiate lawless acts in eastern Ukraine and pull back its troops from the Ukrainian border. In the light of the latest events, the Council also decided to expand the list of those subject to assets freeze and visa bans.

1.27 EU High Representative/Vice President (HRVP) Baroness Ashton participated in a meeting between the European Union, the United States, Ukraine and Russia in Geneva on 17 April to discuss the crisis in Ukraine. In a joint statement issued following the meeting, it was agreed, inter alia, that all sides must refrain from violence, intimidation or provocative actions; that all illegal armed groups must be disarmed and illegally occupied buildings and public places vacated with amnesty granted to those who did so; that the OSCE Special Monitoring Mission should play a leading role in implementation of these de-escalatory measures and that the constitutional process announced by the Ukrainian authorities would be inclusive, transparent and accountable.

1.28 G7 leaders on 26 April welcomed the positive steps taken by Ukraine to meet its commitments under the Geneva accord, including work towards constitutional reform and decentralisation, the proposal of an amnesty law for those leaving seized buildings and supporting the work of the OSCE, noting the restraint used in dealing with armed bands illegally occupying government buildings and forming illegal checkpoints. In contrast, Russia's lack of concrete actions in support of the Geneva accord was noted along with continued escalation of tensions through rhetoric and ongoing military manoeuvres on the Ukraine's border.[11]

1.29 In line with the G7 statement and as agreed at the 14 April Foreign Affairs Council, on 28 April the EU expanded the list of persons subject to targeted sanctions for actions undermining Ukraine's territorial integrity sovereignty and independence, with travel bans and asset freezes on a further 15 individuals.[12]

1.30 In sum:

    "The EU believes a peaceful solution to the crisis should be found through negotiations between the Governments of Ukraine and the Russian Federation, including through potential multilateral mechanisms.

    "The EU also remains ready to reverse its decisions and reengage with Russia when it starts contributing actively and without ambiguities to finding a solution to the Ukrainian crisis."[13]

The Council Decisions, Council Implementing Decision and Council Regulation

1.31 In his Explanatory Memorandum of 14 August 2014, the "duty" Minister at the Foreign and Commonwealth Office, covering for the Minister for Europe in his absence, (James Duddridge) explains that:

—  on 18 July 2014, the EU Council agreed to expand the criteria under which individuals and entities can be listed with Ukraine restrictive measures, with the view of "targeting entities, including from the Russian Federation, that are materially or financially supporting actions undermining or threatening Ukraine's sovereignty, territorial integrity and independence";

—  on 30 July 2014, eight individuals and three entities were listed under these new criteria via Council Decision 2014/508/CFSP and Council implementing Regulation (EU) No. 826/2014;

—  on 31 July 2014, Council Decision 2014/512/CFSP and Council Regulation (EU) No. 833/2014 introduced an embargo against Russia on the export and import of arms, the export of Dual-Use goods to military end-users and the export of certain technologies suited to shale gas projects and oil exploration & production in deep water and arctic oil operations;

—  restrictions were also introduced on the provision of certain financial instruments involving five key Russian financial organisations, within specific parameters.

The Government's view

1.32 The Minister goes on to note that expanding the listing criteria for Ukraine sanctions, allowing for the targeting of Russian nationals whose actions undermine the sovereignty and independence of the Ukraine "now allows the EU to target individuals and entities with close ties to Vladimir Putin".

1.33 He then continues as follows:

    "8 individuals were listed under these expanded measures on 30 July 2014, via Council Decision 2014/508/CFSP and Council implementing Regulation (EU) No.826/2014:

·  "Deputy Chief of Staff of the Presidential Administration, Alexey Alexeyevich GROMOV, was listed for instructing Russian media outlets to take a line favourable with the separatists in Ukraine;

·  "Spokesperson of the so called 'Lugansk People's Republic', Oksana TCHIGRINA, was listed for making declarations justifying the shooting-down of a Ukrainian military airplane;

·  "Chairman of the 'Supreme Council' of the so called 'Donetsk People's Republic', Boris LITVINOV, was listed for organising an illegal referendum on independence;

·  "Sergey ABISOV was listed for accepting his appointment as the so-called 'Minister of Interior of the Republic of Crimea';

·  "Arkady Romanovich ROTENBERG was listed as a major shareholder in a company which has secured a public procurement contract to build bridge from Russia to the Crimea and has been long-favoured by Putin during his tenure;

·  "Konstantin Valerevich MALOFEEV was listed for his close links and support to Ukraine separatists;

·  "Yuriy Valentinovich KOVALCHUK and Nikolay Terentievich SHAMALOV were listed as key shareholders of Bank Rossiya, a bank with close ties to senior Officials of the Russian Federation and who have opened branches in Crimea since the annexation.

    "3 entities were also listed under the expanded measures:

·  "Almaz-Antey was listed as a Russian state-owned company responsible for contributing to the destabilisation of the Ukraine by producing anti-aircraft weapons which were supplied to separatists;

·  "DOBROLET was listed for legitimising the annexation of Crimea by exclusively operating flights between Moscow and Simferopol;

·  "RUSSIAN NATIONAL COMMERCIAL BANK was listed for being fully owned and controlled by the so-called 'Republic of Crimea', who have supported materially and financially the actions of the Russian government to integrate Crimea into the Russian Federation.

    "In addition to these new listings, the Council agreed on 29 July a package of economic sanctions measures against Russia, formally adopted in Council Decision 2014/512/CFSP and Council Regulation (EU) No.833/2014 of 31 July 2014. The sanctions came into effect on 1 August 2014 and will remain in place until 31 July 2015, with an initial review of measures due no later than 31 October 2014.

1.34 The Minister then notes that:

—  the Regulation prohibits the export to Russia of arms and related material of all types on the Common Military List;

—  the Decision also requires Member States to impose an import ban;

—  these restrictions extend to the provision of related technical or financial assistance;

—  the export of Dual-Use goods and technology is prohibited to Russia for military end-use, and that these restrictions also extend to the provision of related technical or financial assistance;

—  it is prohibited to export technologies that are suited to, or designed for, deep water oil exploration or production, arctic oil exploration or production and shale gas projects in Russia, and that these restrictions also extend to the provision of related technical or financial assistance;

—  the direct or indirect purchase or sale of bonds, equity or similar financial instruments with a maturity exceeding 90 days, and issued after 1 August 2014, shall be prohibited if involving a major credit or finance development institution established in Russia with over 50% public ownership or control, or involving any legal person, entity or body acting on behalf of, or owned outside the Union more than 50% by, certain organisations;

—  an annex to the regulation lists the banks concerned: SBERBANK, VTB BANK, GAZPROMBANK, VNESHECONOMBANK (VEB) and ROSSELKHOZBANK;

—  none of the measures in this package will have retroactive effect on contracts in place before 1 August 2014;

—  in a bid to maximise the impact of these measures, Council Decision 2014/512/CFSP also encourages third States to adopt similar measures;

—  to implement these measures, exports to Russia of embargoed goods will be managed by the Export Control Organisation (ECO) of the Department of Business, Innovation and Skills;

—  the ECO have set procedures for assessing export license applications and exports will be considered against the UK's obligation to adhere to EU restrictive measures, consulting the FCO and the Department of Energy and Climate Change; and

—  HM Treasury are responsible for the implementation of financial sanctions measures in the UK. The necessary secondary legislation to give effect to the Regulation has been put in place and the financial institutions and regulators informed.

1.35 Summing up, the Minister says:

    "Although the practical impact of these measures cannot yet be assessed, as a whole they send the message that the UK and the EU will not accept the efforts of Russia to destabilise and undermine the sovereignty of the Ukraine. The additional listings seek to target individuals and entities close to Vladimir Putin, in a bid to increase the pressure on those with influence at the top. The embargo will ensure that the EU plays no inadvertent role in facilitating the supply of goods which could contribute to Russia's efforts to support separatists in the Ukraine. The areas of the embargo targeting shale gas projects and oil exploration & production will ensure that the long-term development of Russia's oil sector is slowed by the denial of vital technology from the EU and other countries imposing similar measures. The financial measures are designed to raise the cost of borrowing in Russia, for state corporations and others."

1.36 The Minister also refers to Council Decision 2014/507/CFSP and Council Regulation (EU) No. 825/2014, concerning restrictions on goods originating in Crimea or Sevastopol, which we consider in our Ninth Report, and which he says also "form an important part of the UK's response to the Ukraine Crisis".

Previous Committee Reports

None: but see (36028) —, (36029) — and (36030) —: First Report HC 219-i (2014-15), chapter 28 (4 June 2014); also see (35905) — and (35906) — : Forty-seventh Report HC 83-xlii (2013-14), chapter 23 (30 April 2014) and Forty-fifth Report HC 83-xl (2013-14), chapter 5 (2 April 2014); also see (35880) — and (35881) —: Forty-fourth Report HC 83-xxxix (2013-14), chapter 3 (26 March 2014) and (35848) — and (35849) —: Fortieth Report HC 83-xxxvii (2013-14), chapter 1 (12 March 2014).





1   See the "Background" section of this chapter of our Report for details. Also see "EU formally adopts additional restrictive measures against Russia" at http://www.european-council.europa.eu/home-page/highlights/additional-restrictive-measures-against-russia?lang=en.  Back

2   See "Euractiv" at http://www.euractiv.com/sections/europes-east/slovakia-grumbles-eu-begins-crisis-russia-food-ban-talks-307795?u"tm_source=EurActiv+Newsletter&utm_campaign=8df7988b68-newsletter_weekly_update&utm_medium=email&utm_term=0_bab5f0ea4e-8df7988b68-245605241.  Back

3   See http://www.eeas.europa.eu/statements/docs/2014/140826_02_en.pdf for the full text of these remarks to the press. Back

4   For the full article, see to read full article -> http://www.fitchratings.com/gws/en/fitchwire/fitchwirearticle/EU-Has-Little?pr_id=857374&cm_mmc=FitchWire-_-EU+Has+Little+Chance+of+Cutting+Reliance+on+Russian+Gas-_-26+Aug+2014-_-NA. Back

5   See http://www.bbc.co.uk/news/world-us-canada-28976794 for the full text. Back

6   The record of the European Committee debate is available at http://www.publications.parliament.uk/pa/cm201415/cmgeneral/euro/140702/140702s01.htm (Gen Co Deb, European Committee B, 2 July 2014, cols 3-28). Back

7   See http://europa.eu/newsroom/highlights/special-coverage/eu_sanctions/index_en.htm.  Back

8   Ditto. Back

9   Ditto. Back

10   Ditto. Back

11   See https://www.gov.uk/government/news/g7-leaders-statement-on-ukraine-april-2014.  Back

12   For full information on EU-Ukraine relations, see the EEAS 29 April 2014 Fact Sheet at http://eeas.europa.eu/statements/docs/2014/140429_04_en.pdf. Back

13   See http://europa.eu/newsroom/highlights/special-coverage/eu_sanctions/index_en.htm.  Back


 
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