The European Union has spent months rebuking Russia for fuelling the unrest in Ukraine. But so far, it had assiduously dodged the most painful punishment in its arsenal - economic sanctions, financially unpleasant for both of the major trading partners.

Everything changed on July 17, when a Malaysia Airlines plane crashed in eastern Ukraine, killing all 298 people on board. Allegations quickly surfaced that Russian-made missiles supplied to separatists had been used to shoot down the aircraft.

“Since the beginning of the Ukrainian crisis, the EU has been calling on the Russian leadership to work towards a peaceful resolution ... Our call has been, in practice, left unheeded,” EU president Herman Van Rompuy and European Commission president Jose Manuel Barroso said this week. 

The bloc’s toughest sanctions yet against Moscow came into force yesterday, targeting directly for the first time the Russian economy - its banks, its defence and energy sectors.

They cap a week that has featured round upon round of restrictive measures, not only from the EU, but also the US and Japan, its partners in the Group of Seven (G7).

“We believe it is essential to demonstrate to the Russian leadership that it must stop its support for the separatists in eastern Ukraine and tangibly participate in creating the necessary conditions for the political process,” G7 leaders said in a joint statement.

“I think this is (a) very significant step, ... the US and Europe moving into sectoral sanctions together,” a US administration official had said earlier.

But whether the agreed sanctions will have enough bite remains a subject of debate.

Robin Niblett of the Chatham House think tank, says the measures mark “a major break in post-Cold War EU-Russia relations”, but also predicts that “Russia can live with the sanctions for the short term” given its low debt and still significant reserves.

“President (Vladimir) Putin may conclude that the risks to his domestic political authority from defeat over Ukraine are greater than the prospect of a stagnating Russian economy,” Niblett feels.

And the EU economy could also take a hit, with expectations high that Russia will seek to retaliate. Many of the bloc’s countries have close trade and business ties with Russia, which is a major gas provider.

Barclays analysts Philippe Gudin and Thomas Harjes predict that Russia’s economic problems will radiate back out into the EU.

The repercussions for the EU are not just likely to be economic, however.

“A Europe in conflict with its principal eastern neighbour ... will also be hamstrung politically,” Niblett says, predicting that “fractious internal debates” and a struggle to focus on other international challenges will materialise.

“Russia is Europe’s neighbour. EU members do not have the luxury of posturing,” as he points out.

 

 

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