Several EU Countries Balk at New Sanctions

September 1939 is starting to look eerily parallel to September 2014. Just as in the 1930s, contemporary Europe continues to come up short when it comes to adequately addressing aggression and destabilization on the European frontier. Following the Kremlin’s increasing support for pro-Russian militants in eastern Ukraine with regular Russian military personnel, EU leaders at a special meeting of the European Council threatened to impose new deep cutting sanctions on the Russian Federation. EU president Herman Van Rompuy said that the EU has agreed to take “further significant steps” to raise the costs of Russian actions. Despite the bold language on a new round of sanctions emanating from some European capitals, several EU countries are pushing back on new punitive measures against Russia. Leaders from Cyprus, Austria, Hungary, Slovakia, and the Czech Republic have stated that they oppose new economic sanctions against the Russian Federation.

What is driving this hesitance to impose EU-wide sanctions on Russia, even though NATO has confirmed that more than 1,000 Russian military personnel have directly invaded Ukraine? At its core, economic reasons and the desire to maintain close bilateral relations with Russia appear paramount. Likewise, personal connections between politicians in these countries and the Russian political and financial elite are a problematic reality in many European capitals, and one that hinders effective action.

The government of Cyprus is probably most vulnerable to Russian pressure and beholden to Russian interests. Cypriot-Russian ties have always been close, considering shared Orthodox religion and Russia’s support for the Greek Cyprus following the Turkish invasion of Cyprus in 1974. Most important, however, are Cyprus’ strong financial and business ties with Russia. Russian tourists make up a significant part of Cyprus’ tourism industry. Cyprus’ second largest city, Limassol, is often jokingly referred to as “Limassolgrad” because of the large number of wealthy Russian expats and vacationers. In addition, Cyprus has long been the go-to Russian offshore tax haven and money laundering center. Some sources estimate that one-third to one-half of all bank deposits in Cyprus are of Russian origin, which helps keep the Cypriot economy afloat. Many of these deposits are placed in Cyprus to avoid taxes and investigations from the Russian government. Perhaps most ominously, Russian shareholders own a controlling stake of Cyprus’ central bank, the Bank of Cyprus, in effect having significant influence over the island’s economy.

Hungary’s position with Russia is tied to the country’s economic dependence on the Russian energy, as well as shared political interests between Budapest and Moscow. Like many European countries, particularly in the east, Hungary is highly reliant on Russian energy. Approximately 86 percent of the country’s foreign energy imports come from the Russian Federation. Experts have long pointed out the similarities between Vladimir Putin and Orban, he has specifically mentioned Russia as a model for Hungary as he has called for the end of the “liberal state” in Europe and consolidated power into his own hands. Orban has copied rhetoric from the Kremlin, calling for the protection of Christian values in Hungary and the restriction and monitoring of NGOs that receive foreign funds. In January, Hungary reached an agreement with Russia over Moscow’s cooperation in the construction of a nuclear power plant in Paks, Hungary. Likewise, Hungary was an enthusiastic support of Hungary’s South Stream pipeline, which supplies gas to Europe and bypasses Ukraine.

Slovakia, like Hungary, is also prone to Russian economic bullying. About 98 percent of Slovakia’s foreign energy imports originate in Russia and 40 percent of Russian gas bound for Europe comes through Slovakian pipelines. There are also close personal relations between Slovakian policy makers and the Kremlin. Prime Minister Robert Fico has long used discussion of the “shared Slavic heritage” between Russia and Slovakia to support the deepening of Slovakian and Russian relations. In addition, Slovakia’s Moscow-educated Foreign Minister, Miroslav Lajcak, has met Russia’s hardline deputy prime minister, Dmitry Rogozin, several times since the beginning of the crisis in March. Reports after Russia’s annexation in March indicated that Slovakia had tried to keep Rogozin off the list of the first-round sanctions. Fico had perhaps the harshest words for the EU’s sanctions approach, calling them “meaningless and useless.” Slovakia’s past role in sanctions negotiations have been described as “unhelpful” by representatives of other EU member states, with Reuters quoting one EU diplomat that “Slovakia has ignored European security for the sake of gas prices.”

The unwillingness of some EU member-states to deepen sanctions, particularly three former members of the Soviet bloc, highlights the corrosive influence of Russian financial and economic ties on sound security policy. The Russian government has skillfully embedded itself into the European economic and financial system over the past decade and crafted personal and business relations with influential individuals, all without adopting democratic or international norms of behavior. As a result, Europe is suffering from an inability to provide for its own security at the expense of financial, and business ties. As certain members start to balk at the imposition of new sanctions on the Russian Federation, we are faced with the unwelcome prospect of certain European countries unilaterally adopting new sanctions, undermining the effectiveness of coordinated action and the appearance of European solidarity.

Chris Dunnett, Ukraine Crisis Media Center