London leads 
Russia sanctions

LONDON — The City of London will be in the front line of economic sanctions against Russia after the European Union on Tuesday pulled back 
from measures that would hit a 
French defence deal or harm Germany’s engineering exports, hinting at divisions in Europe over actions to take against Russia.

A ban on trading in equity of 
Russian state-owned banks will enter into force tomorrow with the aim of cutting off Russia’s access to European financial markets, transactions that are almost entirely carried out in the City.

Both the EU and United States are stepping up sanctions after Russia failed to stop the “flow of weapons, equipment and militants” into Ukraine following the shooting down of Malaysia Airlines Flight 17 on July 17 with the loss of 298 lives. The measures mark the start of the biggest confrontation between Russia and the West since the end of the Cold War and come as fighting in eastern Ukraine intensifies.

Measures agreed on Tuesday include an EU embargo on arms sales to Russia, but will not block a £1 billion (S$2.1 billion) French contract to supply two amphibious invasion warships to Russia because the contract was signed in 2011.

“The principle of non-retroactivity will apply across all targeted sectors, notably in the field of arms trade,” said an EU negotiating document agreed on Tuesday.

The deal means that France will deliver the first Mistral amphibious assault ship to Russia this autumn despite warnings from East European countries that Russia could use the military hardware against them.

Delivering the warships has been described as “unthinkable” by British Prime Minister David Cameron and yesterday, Japan also expressed “strong concern” that it is going ahead.

Original EU proposals tabled last week sought to block “dual use” goods that can be used for military purposes, worth £3.1 billion a year, including “special materials, quantum key distribution systems, some machine tools, high-performance computers and electronics”.

However, to protect Germany’s engineering, energy and computer systems industries, the EU diluted measures on “dual use” goods by limiting bans to military end-users only and exempting the gas sector from any technology restrictions.

“This agreement clearly confirms that the United Kingdom will bear the biggest economic burden from these sanctions.

“However, this was crucial in driving the agreement,” said Mr Raoul Ruparel, head of economic research at the Open Europe think-tank.

“Without the likes of the UK, and to an extent Germany, footing more of the Bill, it is unlikely any deal would have been reached.”

THE DAILY TELEGRAPH