Europe considers Russia a modest initial set of sanctions

BRUSSELS — With President Vladimir V. Putin of Russia ordering troops into separatist enclaves in eastern Ukraine already held by Moscow’s sympathizers and proxies, he has put the European Union into a quandary: How harsh should punitive sanctions be?

At the heart of the matter is whether Mr. Putin’s actions amount to a further Russian invasion of Ukraine — or even to what President Biden once labeled a “minor incursion” — and how to keep the 27 European Union member states sticking together.

Josep Borrell Fontelles, the bloc’s foreign policy chief, was careful with his words on Tuesday. “Russian troops have entered into Donbas,” he said, referring to the separatist enclaves. “We consider the Donbas part of Ukraine. I wouldn’t say it is a fully fledged invasion, but Russian troops are on Ukrainian soil.”

It was the kind of careful parsing of facts on the ground that indicated negotiations about sanctions would be a delicate process if the United States and its allies were to keep a unified front — precisely what Mr. Putin seems determined to test.

Mr. Borrell promised a decision on sanctions from E.U. foreign ministers by the end of the day, but he also said that “this doesn’t mean that today we will take all the decisions” on penalties, only the “urgent” ones.

Prime Minister Boris Johnson of Britain spoke similarly on Tuesday about his country’s plans to impose “just the first of a barrage of sanctions, because we believe there will be more Russian irrational behavior to come.”

And, in an important signal to Moscow, Chancellor Olaf Scholz of Germany said that he would put a stop to certification of the Nord Stream 2 natural gas pipeline, which connects Russia and Germany, bypassing Ukraine, for the indefinite future.

The $11 billion pipeline, which wholly belongs to the Russian state-owned company Gazprom and the Kremlin, is completed. But Mr. Scholz said that he would withdraw an existing government judgment that the pipeline posed no security risks. “No certification of the pipeline can now take place,” Mr. Scholz said. “And without this certification, Nord Stream 2 cannot go into operation.’’

For the moment, it is not being killed, but simply kept in hibernation. The pipeline is more a question of costs already sunk than of immediate impact, and not using it will, if anything, keep European energy prices high, because the European Union currently relies on Russia for 40 percent of its natural gas.

So far, by keeping Russian troops from crossing the so-called “contact line” between separatist forces and Ukrainian soldiers, Mr. Putin appears to be trying “to navigate below the threshold of tough sanctions,” said Ulrich Speck of the German Marshall Fund, a think tank in Berlin. Mr. Putin’s tactics seem to be “advance, pause, negotiate,” Mr. Speck noted.

If Mr. Putin sends troops beyond the contact line, “then I think it is the full monty of European sanctions,” said Nathalie Tocci, director of the International Affairs Institute in Italy. “But if he just sticks to the occupied areas, then there will probably a long and potentially divisive discussion.”

The European Union cannot afford not to come to an agreement, Ms. Tocci added, so, if Mr. Putin does not advance further now, it is likely that even Poland and the Baltics, despite their strong views about punishing the Kremlin hard and quickly, will accept a partial set of sanctions, as will Hungary, which is more pro-Russia but has always gone along with sanctions against Moscow even while complaining about them.

“The paradox of the situation is that the worse it is for Ukraine, the easier it is for us to stick together,” Ms. Tocci said, referring to the European efforts.

What the bloc is considering so far is a partial set of sanctions, mostly linked to the Russian recognition of the separatist enclaves.

Diplomats with knowledge of the discussions and the content of the penalty package under discussion on Tuesday said that it would include 27 individuals and entities, including political, military, business and financial entities, as well as “propagandists” linked to the recognition decision. The diplomats spoke on condition of anonymity to discuss talks still underway.

Some, but not all, of the people and organizations to be targeted are geographically inside the two enclaves, Donetsk and Luhansk, the diplomats said. But the package of sanctions under discussion also includes members of the Russian Duma who proposed and voted for the resolution to recognize the enclaves. The diplomats added that the penalties would include European Union-wide asset freezes and travel bans.

The proposed sanctions would also prevent Russian state and regional governments, including state banks, from accessing European Union financial and capital markets, said a senior E.U. official, who also requested anonymity to discuss the behind-the-scenes deliberations.

A joint statement by Ursula von der Leyen, president of the European Commission, and Charles Michel, president of the European Council, said that the initial E.U. sanctions would target “those who were involved in the illegal decision” to recognize the enclaves, as well as banks that were “financing Russian military and other operations in Luhansk and Donetsk.” It added that the goal was to ensure that “those responsible clearly feel the economic consequences of their illegal and aggressive actions.”

Guntram Wolff, director of Bruegel, a Brussels-based economic research institution, said, “The main difficulty will be preserving the unity of the E.U. over time.”

“If Russia attacks a country in the center of Europe we have to be prepared to be bold in our response, and that means economic and financial sanctions that are far-reaching and biting,” he said. “It can’t just be a short-term thing for a few months but must be sustained to really increase the cost to Russia. But that means the cost on our side will increase.”

And the cost to Europeans of the penalties on Russia will be not equally distributed, he added. “So the politics of sustaining sanctions will get more difficult over time because of domestic politics and different economic interests,” he noted. “In the shock of invasion, we’re ready to be tough. But the real question is will it last more than three or six months. If it lasts two to three years, then it really cripples the Russian economy, and this will be a real problem for Putin — if it holds.”

In general, the European Union can sustain losses more easily than Russia, as the bloc has an economy 10 times bigger. Only some 5 percent of the bloc’s exports go to Russia, but about half of Russia’s exports go to the European Union, “so that gives us economic leverage,” Mr. Wolff said.

But there are “a lot of domestic taboos,” he added, especially around energy. “So the real problem for policymakers is to sustain sanctions in the face of domestic pressures and special interests that will oppose these sanctions because of the economic and financial loss.”