- POSTED: 01 Aug 2014 02:18
- UPDATED: 01 Aug 2014 03:06
The European Union formally adopted broad economic sanctions against Russia on Thursday (July 31), hoping they will force Moscow to reverse course on the Ukraine crisis.
BRUSSELS: The European Union formally adopted broad economic sanctions against Russia on Thursday (July 31), hoping they will force Moscow to reverse course on the Ukraine crisis. They were published in the EU's Official Journal late in the day, meaning that they will come into effect on Friday.
The new measures, finally agreed earlier this week after months of hesitation, target Russia's banking, defence and energy sectors in view of its "actions destabilising the situation in eastern Ukraine," a statement said.
A first step limits access by Russian state-owned banks to Europe's financial markets, chief among them London, which will increase their cost of doing business and hinder their contribution to the economy. Five banks were named, among them the largest in Russia: Sberbank, VTB, Gazprombank, VEB and Rosselkhozbank.
EU nationals and companies will no longer be allowed to buy or sell new bonds, stocks or other debt instruments with a maturity of more than 90 days issued by such banks, the statement said.
Sales of arms and dual-use technology are banned, along with sensitive technologies in the oil sector, but Europe has baulked at applying sanctions to Russia's gas industry, which supplies around a third of the EU's needs.
Analysts say the oil sector ban could cause significant problems for Russia over time because it relies heavily on advanced Western drilling technology, especially for the development of shale gas reserves and new fields in extreme environments such as the Arctic. "The measures will apply to new contracts," the statement said, meaning current deals and activities are not covered.
Ratings agency Moody's said the sanctions will not cause an immediate liquidity crisis as Russian companies and banks have sizable cash and financial buffers. But it said the measures will worsen a "gradual downward trend in the country's growth potential". "The sanctions add to factors already weighing on Russia's economy and financial system that have been exacerbated by the conflict in Ukraine," Moody's said.