EU Contemplates Tariffs on Russia in Response to Ukraine Conflict: Could Economic Sanctions Lead to a Ceasefire?
Unleashing Pressure Against Russia: Europe's Hard-Hitting Moves Beyond Sanctions
The European Union (EU) is prepping some thrilling maneuvers to keep the financial heat on Russia, even if Hungary decides to exercise its veto, blocking the renewal of the EU's sanctions regime against Russia this July.
According to reports from the UK's Financial Times, the European Commission has outlined a plan to adapt a significant chunk of EU sanctions to a fresh legal framework, thereby curving around Budapest's veto. This strategy aims to maintain the financial strain on Russia, come rain, hail or Hungarian veto.
A Glimpse into Hungarian Obstruction
For a while now, Hungary's prime minister, Viktor Orban, has taken advantage of his central European nation's reliance on Russia, as it imports 85% of its natural gas from Mother Russia. Orban has displayed an amicable countenance towards Moscow, often putting a stumbling block in the path of EU boycotts against Russia due to his nationalist government's pro-Moscow stance.
The First Direct Dialogue Since the Invasion
As Ukraine and Russia hold their first direct peace talks since Russia initiated its full-scale invasion of Ukraine in February 2022, the EU's recent proposals have taken center stage. These talks are happening in Istanbul, Turkiye, though Vladimir Putin himself won't participate in face-to-face discussions with Volodymyr Zelenskyy.
Last weekend, high-level European meetings in Ukraine sought to pressure Russia into agreeing to a 30-day ceasefire before the Istanbul talks, but, regrettably, Moscow remained unmoved.
What Sanctions are Already in Play?
On Wednesday, the EU brought out its 17th sanctions package against Russia, a move calculated to throttle Russia's economy and compel President Vladimir Putin to wind down the war in Ukraine. Budapest has given the thumbs-up to this latest package, and it will soon be formalized by the European Commission.
The EU has incrementally tightened its screws on Moscow since 2022, with measures such as- Bans on Russian oil imports,- Price caps on Russian fuel, and- Freezing of Russian central bank assets in European financial institutions.
Now, vast sections of Russia's economy - from media organizations to aviation and telecommunications - fall under EU constraints, in addition to trade bans and measures aimed at oligarchs and Politburo members.
As part of the 17th package, around 200 "cloudy" tanker vessels (dubbed the "shadow fleet") have been sanctioned. These ships, with opaque ownership and no links to Western finance or insurance, have proved to be an effective tool in helping Moscow skirt financial sanctions.
The fresh sanctions will also aim at Chinese and Turkish entities allegedly assisting Russia in evading embargoes. New restrictions will be imposed on 30 companies participating in the trade of dual-use goods - products with potential military applications.
The Question of Effectiveness
While support for Ukraine and sanctions have constituted the EU's primary reactions to Russia's war on Ukraine, the question lingers: Have sanctions truly stymied Russia? Despite high oil prices and escalated military expenditures, Russia's economy has outperformed expectations since the start of 2022.
When queried about the overall impact of sanctions on Wednesday, France's foreign minister, Jean-Noel Barrot, candidly acknowledged that their influence had been inadequate. "We will need to extend our offensive," he noted, "because the sanctions so far have not swayed Vladimir Putin from continuing his war of aggression … we must prepare to expand devastating sanctions that could stifle, once and for all, Russia's economy."
What Lies Ahead?
Certainly, the 17th round of sanctions marks merely a phase in the EU's ongoing efforts to undermine Putin's political might if the war in Ukraine continues. Proposed measures include capital controls - obstructions designed to restrict the movement of money to and from Russia - as well as trade measures such as tariffs.
Capital controls can manifest in numerous forms: constraints on foreign investment, limitations on currency exchange, or imposing taxes on the movement of capital. The commission will also likely unveil plans next month to ban new Russian gas spot market contracts with European companies in 2025 and a subsequent total phaseout by 2027.
Brussels may additionally announce tariffs on enriched uranium as part of its initiative to diminish Europe's dependence on Russian fuels. However, it's been argued that these measures wouldn't technically qualify as sanctions, as they wouldn't require the unanimous support of all 27 EU member states, which is customarily required to extend sanctions.
"The EU, it seems, has cooked up these possible retaliations to try and galvanize Russia into agreeing to the 30-day ceasefire ... it seems to be the stick they are brandishing," an analyst familiar with the situation commented, speaking anonymously.
Could the US Impose More Sanctions?
Undoubtedly, the prospect persists that the US could institute additional sanctions on Russia. On May 1, Senator Lindsey Graham, a South Carolina Republican. announced that he had garnered commitments from 72 of his Senate colleagues for a bill that would impose "excruciating" sanctions on Russia.
Graham is leading a draft bill that aims to slap a 500% tariff on imports from nations buying Russian oil and fossil fuels. Donald Trump himself, who seems eager for a rapprochement with Russia, noted in March that he was pondering imposing sanctions and tariffs on Russia until a peace accord is reached with Ukraine.
Does the Sword of Sanctions Hold the Key to Negotiations?
Although sanctions and military assistance have formed the EU's crucial responses to Russia's war on Ukraine, questions linger as to whether such measures can compel Putin to the negotiating table.
"Russia has found ways to evade the sanctions imposed by Europe and the United States," a Make Way for diplomacy, an analyst opined. "To truly throttle Russia, we would need to close the tap, and I'm not optimistic that even more sanctions and additional penalties will bring an end to the fighting."
According to Castellum.AI, a global risk platform, Russia has encountered 21,692 sanctions since the onset of the war - most of them against individuals. Regrettably, several analysts are under the impression that a peaceful resolution may be a distant dream.
- The European Commission plans to adapt EU sanctions to a new legal framework, bypassing Hungary's potential veto, in order to maintain financial pressure on Russia's business and economy, even during times of war and conflicts.
- The EU's recent proposals regarding sanctions have become a hot topic in the ongoing peace talks between Ukraine and Russia, which is the first direct dialogue since Russia's full-scale invasion in February 2022.
- The 17th EU sanctions package against Russia, which Hungary has approved, aims to further constrict the Russian economy, finance, energy, and industry sectors, in an attempt to end the war in Ukraine.
- New restrictions will also be imposed on Chinese and Turkish entities suspected of assisting Russia in evading embargoes, as part of the 17th sanctions package.
- The effectiveness of the EU's sanctions in stymieing Russia has been questioned, despite the high oil prices and escalated military expenditures, as Russia's economy has outperformed expectations since the start of 2022.
