Europe Treads Cautious Path in Confronting Russia

Despite calls for an arms embargo against Russia in light of the downing of a Malaysian jet over Ukraine last week that killed nearly 300 people, the European Union on Tuesday chose to stick with incremental measures to push Moscow to rein in Ukrainian separatists. By stopping short of targeting broad sectors of the Russian economy, European leaders effectively limited U.S. options too. Without Europe on board, any additional U.S. pressure will be far less powerful.

"The Europeans, in the case of sanctions — even in these cases — are likely to follow the U.S. and not leapfrog over the U.S.," said Douglas Rediker, a visiting fellow at the Peterson Institute for International Economics.

European leaders’ cautious path also reflects divisions over what course to pursue, with top politicians trading barbs over the best way forward. British Prime Minister David Cameron argued on Monday, July 21, for broader sanctions against Russia, including an arms embargo, while French President François Hollande said his country’s sale of two Mistral warships to Russia is continuing on schedule.

European foreign ministers said after meeting Tuesday that the bloc would consider broader sanctions against Russia’s energy and defense sectors, but for now is just adding names and businesses to the list of people and entities already targeted by economic sanctions in place since March.

U.S. President Barack Obama on Friday said the plane crash would be a "wakeup call for Europe" but his prediction may not come true. Escalating sanctions would be far more costly for Europe, which has much stronger trade ties to Russia, especially in the energy sector.

While the EU weighs its options, top U.S. senators are pushing anew for harsher sanctions against Russia and are calling on Obama to designate a group of pro-Russian separatists in Ukraine a terrorist organization. Senate Foreign Relations Committee Chairman Robert Menendez (D-N.J.), Senate Intelligence Committee Chairwoman Dianne Feinstein (D-Calif.), and Senate Armed Services Committee Chairman Carl Levin (D-Mich.) issued a letter on Tuesday to Obama calling on him to penalize Russia’s defense, finance, and energy sectors.

"Evidence compiled since the crash, along with efforts to hide evidence and block international investigators, indicates the culpability of Russia and the separatist militants it supports in Ukraine," the lawmakers wrote.

But if European leaders decide that a tougher stance is necessary, the EU could ramp up sanctions quickly. At their meeting, foreign ministers escalated the threat against Moscow by expanding the EU’s sanctions policy, giving the bloc more options. That agreement puts on the table — for the first time — European sanctions against broad swaths of Russia’s economy, something the United States has long threatened.

Europe will consider restricting Moscow’s "access to capital markets, defence, dual use goods, and sensitive technologies, including in the energy sector," according to a statement released after Tuesday’s meeting in Brussels. Those measures could be considered as early as Thursday if Russia doesn’t cooperate, according to EU foreign policy chief Catherine Ashton.

"We urge Russia to stop the increasing flow of weapons, equipment, and militants across the border, so we can achieve rapid and tangible de-escalation," Ashton said at a press conference.

The legal framework also allows the EU to target companies and people that "benefit" from Russia’s annexation of Crimea and de-stabilization of eastern Ukraine, in addition to those who directly support it. That puts Russian oligarchs in the EU’s potential sanctions cross-hairs; the United States has already frozen the assets of a handful of businessmen close to Putin.

One day before the July 17 downing of Malaysia Airlines Flight 17, the EU began expanding its list of targeted individuals and businesses. Although it didn’t reveal specific names then or Tuesday, the bloc could do so later this week.

Eurasia Group’s head of European risk analysis, Mujtaba Rahman, thinks the West will eventually impose broad sanctions on Russian industry because Moscow and Kiev are far from being able to agree on how eastern Ukraine should be governed.

"I don’t think we should interpret lack of EU action as EU weakness," Rahman said on Tuesday. "This plane was actually a game-changer."