G-7 threatens Russia with more sanctions

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G7photo

Reuters.

US President Barack Obama (C) participates in a G7 leaders meeting during the Nuclear Security Summit in The Hague March 24, 2014. At the table are the President of the European Council Herman Van Rompuy, French President Francois Hollande, British Prime Minister David Cameron, Obama, German Chancellor Angela Merkel, Japanese Prime Minister Shinzo Abe, Italy's Prime Minister Matteo Renzi and President of the European Commission Jose Manuel Barroso (L-R, clockwise).

Brussels - The world’s leading industrial powers threatened further sanctions to deter the Kremlin from invading other parts of Ukraine and boycotted what was to be a Group of Eight summit hosted by President Vladimir Putin.

Meeting for the first time since last week’s annexation of Crimea by Russia, Group of Seven leaders said they won’t attend the planned G-8 meeting which was to have to been held in Sochi, site of the Winter Olympics, and will instead hold their own summit in June in Brussels.

“We remain ready to intensify actions including coordinated sectoral sanctions that will have an increasingly significant impact on the Russian economy, if Russia continues to escalate this situation,” the G-7 said in a statement e-mailed after a meeting in The Hague today.

Both sides in Ukraine’s crisis spent the day calculating what to do next, with Russia consolidating its control over Crimea and massing forces along the border with Ukraine in the most serious confrontation between Moscow and the US and its allies since the demise of the Soviet Union.

“We’re united in imposing a cost on Russia for its actions so far,” President Barack Obama told reporters in Amsterdam earlier today at the start of a six-day trip that includes a nuclear-security summit in The Hague and a meeting with the heads of European Union institutions in Brussels.

 

Putin’s Absence

 

The G-7 -- the US, Germany, the UK, France, Italy, Canada and Japan -- went back to its Cold War-era format, suspending what became the G-8 in 1998 when Russia was welcomed in.

The group was all smiles around a Putin-less conference table in a photo posted on Twitter by European Commission President Jose Barroso, who attended along with EU President Herman Van Rompuy.

“It’s Russia that needs to change course,” UK Prime Minister David Cameron told reporters.

US and European warnings focused on potential military moves by the Kremlin into Russian-speaking areas of eastern and southern Ukraine, leaving open whether the West hopes to dislodge Putin’s forces from Crimea, a Black Sea peninsula dominated by Russia since the 18th century.

The US has imposed asset freezes and visa bans on 31 Russian and Ukrainian political and business figures close to Putin and barred Bank Rossiya.

The 28-nation EU has put 51 on the blacklist, including some on the US list, while stopping short of punishing businesspeople.

 

No Accident

 

“The current sanctions are still too little to matter, but that’s not by accident -- it’s by design,” said Fredrik Erixon, director of the European Centre for International Political Economy in Brussels.

“The EU and US are sitting on weapons of mass destruction when it comes to Russia’s economy. The US and EU are laying out possible step-by-step economic sanctions that will start rolling into place if Putin doesn’t behave.”

US and European officials said sanctions are already biting. Russia’s Micex stock index has plunged 14 percent this year, faring worse than the 5 percent decline of the MSCI Emerging Markets Index.

The ruble has dropped 8.9 percent, making it the second-worst performer against the dollar among 24 developing-market currencies tracked by Bloomberg.

Investors pulled out $5.5 billion from Russian equities and bonds this year through March 20, already approaching the total outflow of $6.1 billion for the whole 2013, according to data compiled by EPFR Global, a Cambridge, Massachusetts-based firm tracking fund flows.

 

‘Flagrantly Violating’

 

“As long as Russia is flagrantly violating international law and the order the G-7 has helped to build since the end of the Cold War, there’s no need for the G-7 to engage with Russia,” Deputy US National Security Adviser Ben Rhodes told reporters.

Russia wants Ukraine to adopt a federal constitution that guarantees political and military neutrality, grants powers to Ukrainian regions and makes Russian a second official language.

In a nod to those concerns, the G-7 urged Ukraine to undertake “broad-based constitutional reform, free and fair presidential elections in May, promotion of human rights and respect of national minorities.”

Putin didn’t show his hand today, instead using a public appearance in Moscow to tout Russia’s sporting prowess, urge more support for slopestyle and halfpipe snowboarding, and announce that the Sochi Olympics came in under budget.

Putin sent Foreign Minister Sergei Lavrov to The Hague for a 53-nation summit on the security of the world’s stockpiles of nuclear fuel. Lavrov told reporters that Russia isn’t “clinging” to the G-8 format, viewing the wider Group of 20 as the best forum for discussing global issues.

German Chancellor Angela Merkel said there is no “political environment” for a G-8 meeting.

G-7 foreign ministers will also skip a Moscow meeting in April, and G-7 energy ministers will consult on how “to strengthen our collective energy security,” the G-7 said in the statement. - Bloomberg News


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