Russia’s ability to fund its invasion of Ukraine through Europe’s financial markets is to be hit with a package of EU sanctions closely coordinated with the White House.
As agreement was announced by the 27 European member states on a range of punitive measures against Moscow, Josep Borrell, the EU’s foreign affairs chief, said the first strike from Brussels would “hurt Russia, and it will hurt a lot”.
EU officials said that further punitive measures could be agreed by western allies at a meeting of the G7 later this week depending on Russia’s behaviour.
“We still have quite a huge package in reserve if need be,” a senior EU official said. “And that would be a political discussion with leaders across the Atlantic and with our UK friends. We have a G7 on Thursday. So that will be also discussed if we need to scale up intensity depending on the development on the grounds.”
Ursula von der Leyen, the European Commission president, commended a separate decision on Tuesday by the German chancellor, Olaf Scholz, to suspend certification of the Russian gas pipe Nord Stream 2 after much speculation about its future.
She said: “We will make it as difficult as possible for the Kremlin to pursue its aggressive policies. I think the German government is absolutely right. Nord Stream 2 has to be assessed in light of the security of energy supply for the whole of Europe. Because this crisis shows that Europe is still too dependent on Russian gas.
“Our action today is a response to Russia’s aggressive behaviour. If Russia continues to escalate this crisis that it has created, we are ready to take further action in response. The EU is united and acting fast.”
After a tense 24 hours of intensive discussions, EU foreign ministers had agreed at an emergency meeting in Paris to target banks financing the military operations along with the ability of Russia to access capital by banning Russian bond trades in the European market. The EU will also block all trade from the two breakaway regions to and from the EU. It is understood that banks to be hit include Promsvyazbank and VEB.RF.
Travel bans and asset seizures will also be imposed on 27 individuals and entities who played a role in “undermining Ukrainian sovereignty”, the 351 members of the Duma that voted in favour of Russia’s recognition of the self-proclaimed republics in Luhansk and Donetsk and the 11 that proposed it along with the commanders of the Russian military “peacekeeping” mission.
The package mirrored that planned by the US but was tougher than that presented by Boris Johnson in the House of Commons earlier in the day, with the UK threatening only to legislate to prevent Russia from issuing sovereign debt on UK markets.
Officials in Brussels admitted to have been surprised that the UK had not gone harder after hawkish performances by Johnson during behind-the-scene talks in recent weeks but they insisted that there had been close coordination and that the west was united.
There had been some concern voiced among some member states, particularly in the Baltic region, at the insistence of Italy, Austria and Germany on an incremental approach to sanctioning Russia.
But Borrell said the EU needed to maintain leverage over Russia’s behaviour. “We are afraid that this story has not finished,” he said.
An official added: “We can calibrate because you have the The Full Monty and you can calibrate depending on developments.”
It is understood that cutting Russia out of the Swift financial system, which moves money from bank to bank around the world, is within the scope of a second tranche of sanctions that could be imposed.
Such a move could cut Russia off from most international financial transactions, including international profits from oil and gas production, which in all account for more than 40% of the country’s revenue.
“We are not contrary in principle [to further sanctions] but we believe in an incremental approach, if the escalation is growing, if the threat is growing,” said one EU diplomat from one of the more cautious member states.
Hungary had been the only member state not to immediately offer full support for the list of individuals that would be hit by travel bans and asset seizures during a meeting of EU ambassadors on Tuesday morning.
But Charles Michel, the European Council president, had secured the support in private of the country’s prime minster, Viktor Orbán, and unanimity was achieved over the entire package.