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Published On: Thu, Jul 31st, 2014

New EU and US sanctions approved on Tuesday following Ukrainian hostilities

The US and the EU agreed on more stringent sanctions on Tuesday, to hit Russia’s crucial sectors: energy, banking, and defense, as condemnation of the weapons Russia is sending to support Ukrainian rebels.

The US and the EU agreed on more stringent sanctions on Tuesday, to hit Russia’s crucial sectors

Further sanctions were announced by the EU and the US against Russia on Tuesday, targeting the country’s energy, defense and banking sector. That is the most austere action so far triggered by Russia’s support of eastern Ukrainian rebels. The new phase in the Russia – West confrontation already deepened dramatically on account of the Malaysian flight MH17 crash over the Ukrainian rebels held territory which was believed to have been downed by Russia-supplied missile.

President Obama has warned that should Russia continue its course of action, it will face mounting sanctions. Those introduced so far have already weakened the struggling Russian economy. Angela Merkel, German Chancellor, though previously unwilling to support sanctions as Germany has trade links with Russia, now pointed out the latest sanctions were unavoidable.

Until recently EU sanctions were aimed only at organizations and individuals believed to be directly involved in Ukrainian hostilities. On Tuesday, the meeting of EU diplomats and ambassadors in Brussels decided on restrictions on trading in equipment for the oil and the defense sectors, and technology for civilian and defense applications. There will also be barring of the country’s state managed banks from raising funds on European capital markets. The sanctions are to be reviewed in three months.

The new sanctions have been coordinated with the US in the hope of persuading President Putin into abandoning Russia’s participation in Ukrainian disruptions. However, Putin failed to yield. More Kremlin heavy weaponry is said to have been sent to the Ukrainian separatists, though Moscow denies the support.

Persuading the EU for the stepping up of sanctions was a tough task, as the amount of trade between EU and Russia is tenfold compared to the trading the US does with the country. Unanimity had to be reached among all EU member countries.

Previous contracts will not be affected by the new sanctions which will help to mitigate the harsh impact on EU economies. Another area which will not be affected by the new sanctions is the natural gas supplied by Russia as it is indispensable for European industry and for European city lighting. Russia is known to be the largest global exporter of natural gas. It is also the second largest exporter of oil globally. However, Russia’s oil industry will suffer from the sanctions.

Despite efforts for mitigating the impact of the new measures, some European companies and countries will be hit. One of them, BP, Britain’s large energy company and the largest scale foreign investor in Russia, has a stake in Russian company Rosneft of almost 20 percent. Another area to be adversely impacted is the financial hub in London, owing to the measures taken against Russian banks. In Germany, manufacturing companies stand the risk of losing customers. Despite all these negative impacts, harsh as the new sanctions are, they will build the pillar of future security throughout Europe.

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