EU nations lock horns over Russia sanctions

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The EU’s sixth package of sanctions against Russia over the war in Ukraine finally landed yesterday and has proved to be the most controversial yet.

EU ambassadors spent another sunny spring day in Brussels locked in talks on the measures. Several countries had expressed deep reservations about the oil embargo. But the other parts of the package such as bans on providing shipping services to tankers carrying Russian crude and corporate services to Russians are unpopular with Greece, Malta and Cyprus. We will take you through the debate.

New rules to prevent foreign-owned companies from using government subsidies to gain an advantage in the EU’s single market moved ahead yesterday, with approval likely within weeks. We have the latest.

The people of Northern Ireland will have their first vote since the Brexit deal. With the UK government threatening to tear up parts of the Brexit deal, we’ll look at the impact the election could have on strained EU-UK relations.

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Sanctions bazaar

The EU’s proposed sixth sanctions package contains its most aggressive penalties on Russian fossil fuels, and as such promises to be the most painful economically for its 27-member countries, write Andy Bounds in Brussels and Eleni Varvitsioti in Athens.

So talks to overcome objections lasted all day yesterday and will restart today. A quick recap of the measures in draft documents seen by Europe Express:

  • A ban on importing crude oil within six months and refined products by the end of the year

  • Sberbank and two other banks to be barred from using the Swift international payments system

  • A ban on EU companies transporting Russian oil or providing maritime services

  • A ban on many professional services being provided to Russians, including accountancy and trust incorporation and management

  • Sanctions on 58 individuals and several companies

  • A ban on three Russian broadcasters

  • Restrictions on selling property to Russians

No one in Brussels was surprised that Hungary objected to a ban on Russian oil imports, but some were taken aback that Budapest was not alone.

Hungary and Slovakia were offered an extra year to comply but want more, as does the Czech Republic.

Diplomats say they are not yet clear what will buy Budapest off. Perhaps money for new energy infrastructure. “It’s not clear what they want besides a full exemption with no time limit,” said one.

Brussels last month wrote to Budapest over “serious concerns” about its use of EU money, a step towards cutting funding. It would find it uncomfortable to release large sums to convert refineries and build pipelines, given concerns over corruption.

Meanwhile, Greece is worried by the limits on shipping and Cyprus fears the economic impact on its professional services sector, which has many Russian clients.

Germany may hold the key. Its government has justified offering more time to some countries, given their circumstances. Czech premier Petr Fiala is in Berlin today asking for help to share the pain, and Germany may have to play a role unlocking compromise.

Chart du jour: China to the rescue

Read more here on how China’s independent refiners have been discreetly buying Russian oil at steep discounts as western countries suspend their purchases and explore potential embargoes because of the war in Ukraine.

Level playing field

Legislators in Brussels are close to reaching a deal on new rules aimed at clamping down on market-distorting subsidies by foreign governments, with an agreement in sight as early as the end of next month, writes Javier Espinoza in Berlin.

Margrethe Vestager, the EU’s competition commissioner, told Europe Express that a political deal on the measures, which would result in penalties on non-EU companies that were backed by illegal state aid, was within the bloc’s grasp.

Her comments came on the day the European parliament approved its amendments on the proposal ahead of negotiations with member states on a common text.

The new rules represent a move to guard the EU against state-backed actors from overseas, in particular China. The bloc’s current state aid rules affect only funds handed out by European states, which officials fear has led to an uneven playing field.

The new legislation will give Brussels powers to ban companies from acquiring European rivals and to forbid them from taking part in public procurement bids if market-distorting state aid subsidies from outside the bloc are found.

Vestager admitted it would be challenging to figure out which companies had benefited from illegal state aid. She said: “The really tricky point here is to find [subsidies that distort competition], to see if something is at stake that raises our suspicion. We don’t have tools to force other governments to answer our questions.”

But under the legislation Brussels would be able to act even if it had not received full disclosure from foreign companies on subsidies. She said: “If we have done what we can and it is still not possible, then we can make a decision based on the information that we have on the file.”

Legislators said the French presidency of the EU was keen for a deal before its term ends on June 30.

Stormont torment

Northern Ireland Protocol — three Brexit words synonymous with frustration in Brussels, London and Belfast — will be back in the spotlight after today’s elections to Northern Ireland’s Stormont assembly, writes Jude Webber in Dublin.

The vote is likely to deliver both a historic result and a political stalemate: nationalist party Sinn Féin is the pollsters’ favourite to emerge as the winner — a first in a region dominated by unionists since it was severed from Ireland in 1921.

The DUP, the biggest unionist party, faces relegation to second place (or, in what would be a shock result, even third).

With a likely strong showing for the centrist Alliance and nationalist SDLP, EU officials will stress that pro-protocol parties will be in the majority.

However, the DUP’s implacable opposition to the protocol — the special post-Brexit trading arrangements that put a customs border in the Irish Sea and kept Northern Ireland in the EU’s single market for goods — means there is virtually no prospect of an executive anytime soon.

The DUP pulled its first minister out of the Stormont executive in February in protest at the protocol. Leader Sir Jeffrey Donaldson’s refusal to return to the executive unless the sea border is scrapped means Northern Ireland would be staring at up to 24 weeks with a zombie administration that is neither fully alive nor entirely dead.

Ministers would stay on as caretakers with no ability to enact policy. If no deal were possible then, new elections would follow at the start of next year.

Donaldson sees a boycott as a way of piling pressure on the UK government to accept nothing less than the elimination of customs checks with Britain that he says undermine Northern Ireland’s place in the UK.

He is refusing to return to Stormont until the Irish Sea border is scrapped. Brussels has ruled that out but may offer to reduce checks in an attempt to get a deal.

London is threatening unilateral action to tear up the protocol, which could trigger legal action from the European Commission, fuelling tensions as Northern Ireland’s Protestant marching season in July approaches.

The polls point to a close race, with Sinn Féin and the DUP likely to lose support and the centrist Alliance party likely to make gains. The results will trickle in on Friday and probably Saturday. But the outcome is a foregone conclusion: no progress, more tension.

What to watch today

  1. Further talks on the sanctions package in Brussels

  2. Local elections in the UK, including Northern Ireland

  3. State of the Union conference in Florence begins, featuring EU foreign policy chief Josep Borrell

  4. US First Lady Jill Biden visits Romania and Slovakia

Notable, Quotable

  • Adjusting course: For weeks, German Chancellor Olaf Scholz has been attacked for his reticence on Ukraine. Now he has found his voice. In television interviews, newspaper columns and public speeches he has gone on the offensive, explaining his policies to anxious Germans and defending himself against charges of vacillation.

  • Nordic concerns: Joining Nato will give Sweden and Finland protection under a collective defence commitment that ensures an attack on one member generates a response from the entire alliance. But what particularly worries both countries is the period before they become official members, when no such guarantee would apply.

  • Retail retreat: Eurozone retail sales fell more than expected in March, compounding fears that surging inflation and worries over Russia’s invasion of Ukraine have cancelled out the boost to consumer spending delivered by the lifting of pandemic restrictions. The disappointing data added to concerns that the eurozone risks sliding into stagflation.

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