Merkel Says Russia Faces Economic Sanctions If Situation Worsens

German Chancellor Angela Merkel said Russia faces economic sanctions if President Vladimir Putin fails to contain an escalation of the situation that has led to the illegal annexation of the Crimea peninsula.

European Union heads of state and government meeting in Brussels today will widen a list of so-called stage-two measures decided two weeks ago that include travel bans and bank account lockouts, Merkel said in a speech in the lower house of parliament, the Bundestag.

“In addition, the EU Council will today and tomorrow make it clear that we’re always ready to enact stage-three measures if the situation worsens,” Merkel said. “And without any doubt, this will also be about economic sanctions.”

Germany, Europe’s biggest exporter, is tugged between trade and energy links with Russia and calls by neighbors such as Poland and the Baltic states for a firmer response to aggression on the EU’s doorstep.

Germany relies on Russia for 35 percent of its oil and natural gas imports. About 6,200 German companies generate exports of 36 billion euros ($49.7 billion) and imports of 40.4 billion euros in trade with Russia, according to the BGA exporters’ lobby.

Economy Minister Sigmar Gabriel halted delivery of a Rheinmetall AG (RHM) battle training center to Russia’s Volga region in response to the annexation of Crimea, Focus magazine reported. The Economy Ministry wasn’t immediately able to confirm the report.

Provoke Tensions

Russia will seek to further provoke tensions in eastern and southern Ukraine, interim Ukrainian Prime Minister Arseniy Yatsenyuk said an interview early today in Brussels. He rejected the legitimacy of a March 16 vote in Crimea on joining Russia that was held amid the visible presence of pro-Russia forces.

Merkel also said a scheduled German-Russian government conference to be held at the end of April may still be canceled and said Russia has kicked itself out of the Group of Eight club.

“As long as the political environment for such an important format as the G-8 doesn’t exist, the G-8 is no more, neither the summit, nor the format as such,” Merkel said.

To contact the reporters on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net; Birgit Jennen in Berlin at bjennen1@bloomberg.net

To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net Leon Mangasarian, Marco Bertacche

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