EU Said to Ready Sanctions on Some Russian Companies

The European Union is preparing to expand its sanctions over the Ukraine conflict to include some Russian companies, with a list of targets that may be approved as soon as May 12, according to two officials from EU countries.

The Russian companies facing penalties are blamed for the expropriation of businesses in Crimea, which Russia annexed from Ukraine in March over protests from the EU and the U.S., according to the officials, who spoke in Washington on condition that they not be named because of the sensitivity of the issue.

Envoys from the EU’s 28 member states agreed provisionally on May 7 to expand their targets for sanctions to protest Russia’s moves in Ukraine. In addition to certain Russian companies, which the officials didn’t identify, the list includes some Crimean individuals, they said. EU foreign ministers are set to take a final decision at a May 12 meeting.

The EU until now has limited its sanctions -- which impose asset freezes and visa bans -- to individuals rather than financial entities or businesses, because of the stiff legal standard that would require European sanctions to be linked to efforts to destabilize Ukraine or annex Crimea and also because of divisions among members over the scope of penalties.

For now, no new U.S. sanctions are expected to be announced May 12, according to several U.S. and European officials, though that could change if Russia or pro-Russian militants were to take further actions to destabilize Ukraine. Separatists in eastern Ukraine vowed yesterday to proceed with votes on autonomy scheduled for May 11, even after Russian President Vladimir Putin called for a delay.

EU Resistance

The new batch of EU penalties is intended to bring the bloc more in line with previously announced U.S. sanctions, said one European official involved in the discussions. The U.S., whose economy is less entwined with Russia’s than the EU’s, has gone further so far, targeting what American officials have called Putin’s cronies as well as businesses associated with him.

Resistance continues among some EU member states over blacklisting companies because of concern that such a step would move too closely to penalizing a sector involved in commerce with Russia, such as European energy companies or financial institutions, according to the European officials.

One official said targeting only those Russian companies involved in nationalizing Crimean assets is the result of a compromise that was required to get buy-in from European states concerned about the impact on their economies and on businesses that trade with Russia.

Putin’s Tone

Putin’s softer tone on May 7 -- when he urged separatists to postpone the ballots scheduled for May 11 and pledged to pull back Russian troops from Ukraine’s border -- hasn’t been matched by Russia’s actions on the ground nor by the pro-Russian militants, the U.S. and European officials said.

The Russian leader’s shift in rhetoric is more likely a ploy to sow discord among EU and NATO members, to deny involvement in the independence votes and to avoid further sanctions from a divided EU, the officials said,

In Brussels on May 12, EU foreign ministers will “have a debate on the situation, on all new elements, as well as the EU’s response,” Maja Kocijancic, spokeswoman for EU Foreign Affairs chief Catherine Ashton, told reporters in Brussels.

A change to the legal scope of sanctions approved by EU ambassadors would allow “stage-two” measures -- or sanctions on entities -- to be imposed on organizations such as financial institutions and energy companies in Crimea, said an EU official in Brussels yesterday who spoke on condition of anonymity and who didn’t say that Russian companies would be included.

EU foreign ministers are likely to agree May 12 to add more individuals to the sanctions list, the official said. The bloc is far from agreeing on “stage three” or sectoral measures, that would have a broader economic impact, the official said. The EU so far has blacklisted 70 people, including Russians, Ukrainians and Crimeans, whom it accuses of destabilizing Ukraine or misappropriating funds in the country.

To contact the reporters on this story: Indira A.R. Lakshmanan in Washington at ilakshmanan@bloomberg.net; Ian Wishart in Brussels at iwishart@bloomberg.net

To contact the editors responsible for this story: John Walcott at jwalcott9@bloomberg.net; Alan Crawford at acrawford6@bloomberg.net Michael Shepard, Larry Liebert

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