EU Council passes resolution on sectoral sanctions against Russia

EU sectoral sanctions against Russia will come into effect August 1, Spokesperson for Foreign Affairs and Security Policy of the EU Maja Kocijančič has said.
EU Council is expected to publish an official list of Russian banks that fall under the EU’s sectoral sanctions, a source on the Council told ITAR-TASS.
“This list will be published today” in the Official Journal of the European Union.
ITAR-TASS said earlier in the day that the Council had adopted a legislative resolution for the introduction of economic sanctions against Russia.
They will be published Thursday night and will take effect as of Friday.

Restriction of access to European stock market
As it was reported earlier, the Council of the European Union adopted a legislative measure on imposing sectoral sanctions on Russia. Their first element will be the restriction of access to the European stock market for Russian state-owned banks. The EU has not specified yet, which banks will be affected. According to some reports, this refers to financial institutions with a governmental stake of 50% plus one share.

The EU is set not only to ban European investors from acquiring securities of these banks, but also to trade them on European markets. Financial sanctions cover only new transactions and are not relating back.
The European Commission assessed the volumes of short-term debt instruments (maturity of up to 90 days) placed by Russian banks in 2013 at €7.5 billion. European officials believe their restrictive measures will not trigger Russia’s reorientation to Asian financial markets and development of offshore practices in specific Russian regions, particularly in Crimea, but will force Moscow “review its policy in Ukraine”.

Arms embargo
The second element of the sanctions is an arms embargo and ban from supplying Russia with dual-purpose equipment (designed both for civil and military needs), first and foremost electronics.
The ban will affect only new contracts both for importing and exporting weapons. Thus, for instance, the deal with France on supplies of Mistral helicopter carriers will not be affected by this measure by default, as will do the current agreements with several Eastern European countries on servicing military equipment (primarily planes and helicopters) made in USSR and Russia.

Exports of European military equipment to Russia make about €300 million annually, whereas military imports from Russia exceed €3 billion a year. If EU sanctions last, armies of Eastern European states will lose licensed maintenance of military equipment and will be forced to quickly pass to NATO arms. In this case, they may face serious financial losses, and Russia may lose its positions at their weaponry markets that will be occupied mostly by American arms producers.
An important part of the ban on “dual-purpose commodities” will be the ban on supplying Russia with specific types of chemicals that are used in weapons production. However, in the long-term this measure may turn beneficial for Russia, since it will stimulate an active development of local chemical industry.

Ban on technologies
The third element of the sanctions will be a ban from providing Russia with new technologies and supplying it with hi-tech equipment for the oil mining sector. This refers to equipment and technologies for shelf mining and producing of oil, shale oil mining and polar drilling.
The European Commission claims that today Russia’s oil industry for 60% depends on European technologies. Thus, the sanctions will become a stress-test for Russia’s energy industry.
Initially, the draft sanctions presumed similar restrictions for the natural gas industry. However, this caused strong counter-arguments from many European countries, and, under the threat of a failure of the whole sanctions round, the natural gas sector was completely excluded.
“Export licenses will be denied if products are destined for deep water oil exploration and production, arctic oil exploration or production and shale oil projects in Russia,” the press office of the EU Council said.
The draft EU sanction document also envisaged similar restrictions for the Russian gas industry. However, these restrictions were objected by a whole number of European countries dependent on Russian natural gas supplies and excluded from the sanction list.