June 24 (Bloomberg) -- President Vladimir Putin arrived in Austria after asking Russian lawmakers to revoke his authority to use force in Ukraine, underscoring a diplomatic drive that may deter European efforts to tighten sanctions on Russia.
Putin met with Austrian President Heinz Fischer in Vienna as Russian gas exporter Gazprom OAO and OMV AG of Austria signed a contract to build the South Stream natural gas pipeline. The route will carry Russian gas under the Black Sea, through the Balkans and into Austria, avoiding Ukrainian territory.
“Nobody benefits from sanctions,” Fischer said at a press briefing after his meeting with Putin. “They aren’t helping to produce any profit for anybody.”
The gas deal and Putin’s visit highlight the thin line European governments walk as they attempt to weigh business and economic ties while pressing Russia to de-escalate the conflict in Ukraine.
“The signing of the OMV-Gazprom deal is part of Russia’s attempt to drive a wedge in the EU’s response to the Ukraine crisis,” said Rem Korteweg, a fellow at London’s Center for European Reform, a policy-advisory group. “It is not a good day for a common European approach against Russia or for a common EU energy policy.”
Chancellor Angela Merkel told German lawmakers yesterday that Russia faces full economic sanctions at a summit of European Union leaders this week unless it works to bring about substantial progress in eastern Ukraine, according to two people present at the closed-doors event.
Her comments were soon overtaken, first by a cease-fire announced by pro-Russian separatists in Ukraine and then by Putin’s request that parliament rescind the right to use force in Ukraine. The Gazprom deal serves to bring Russia closer into the European fold, according to OMV.
“This investment decision is an investment in security of supply for gas for Europe,” OMV Chief Executive Officer Gerhard Roiss said in Vienna. “Europe needs Russian gas and it will need more Russian gas as its own supply dwindles.”
Austria’s role highlights how disagreements among the EU’s 28 members complicate a unified response to the Ukraine crisis. A neutral country that began importing gas from the Soviet Union in 1968, Austria grew its financial and industry links to Russia after the Cold War ended.
“We don’t quite understand this policy of intense pressure to isolate Russia, which we think isn’t good for Austria, isn’t good for Europe and is not good the world,” Peter Weinzierl, CEO of Austria’s Meinl Bank, said in an interview. “Austrian business in general is not happy about the situation.”
At the press briefing with his Austrian counterpart, Putin accused the U.S. of attempting to “sabotage” South Stream, which will make Austria Europe’s biggest hub for Russia gas.
“We never work against anyone,” Putin later told the Austrian Chamber of Commerce in a speech. “South stream will strengthen energy security in Europe, especially given crisis in Ukraine.”