Ask most European leaders and they will tell you the same thing: the ball is in Russia‘s court.
Russian leader Vladimir Putin and Ukrainian president Volodymyr Zelenskiy have been locked in a game of metaphorical ceasefire tennis for weeks as each tries to convince US president Donald Trump that the other is holding up a truce in the Ukraine war.
The images from Kyiv last weekend of the leaders of Germany, the UK, France and Poland standing alongside Zelenskiy were a clear nod to demonstrate Europe’s ongoing support for Ukraine in the full scale war that began when Russia invaded in early 2022.
The European leaders arrived in the Ukrainian capital with more than words of encouragement for Zelenskiy. They issued a threat to Russia, saying it would face “massive” sanctions if it failed to agree to a 30-day ceasefire backed by Ukraine.
Rather than be seen to accept an ultimatum Putin pivoted and made a surprising offer that Russia and Ukraine should sit down for talks in Istanbul on Thursday. Zelenskiy called the Russian leader’s bluff by saying he would see him there.
The extensive regime of economic sanctions already levelled on Russia by the European Union, the UK and the US is one of Ukraine’s biggest bargaining chips in any future negotiation. The sanctions have frozen Russian financial assets that were held in western banks and barred companies from having business dealings with Russia in an attempt to make it harder for Moscow to sustain its invasion.
Putin is very keen to get the measures lifted given the damage they have done to Russia‘s economy over the last three years. European diplomats remain concerned Trump may decide to unilaterally drop sanctions the US has imposed, weakening Ukraine’s hand in any peace talks.
The vast bulk of frozen Russian assets are held in Euroclear in Belgium, meaning they would only be released if the EU scrapped its sanctions. The EU hopes this means it will ultimately have a seat at the table if initial talks about ending the war develop into concrete negotiations.
The UK government and the EU have been co-ordinating closely on new sanctions over recent months, even as the US administration lost its appetite. Diplomats from the 27 EU states were this week finalising what will be the 17th package of sanctions since the Russian invasion to keep the pressure on.
The latest batch will target Russia‘s “shadow fleet” of old ships and tankers that sail off the grid under different national flags. The shadow fleet itself emerged as a way to dodge earlier sanctions restricting Russia‘s ability to sell crude oil.
This has been a feature of the EU’s sanction regime since the start of the Ukraine war. Russia will find ways to exploit gaps and loopholes to circumvent the restrictions, as EU officials work to close them off. It is a constant effort meaning as soon as a new package of sanctions is approved work has usually already begun on the next one.
It is expected that the latest round will be ready to be signed into force when foreign ministers meet in Brussels early next week. These will be separate to the “massive” escalation European leaders have threatened should Putin ignore calls for a temporary ceasefire. There is no low hanging fruit left so finding a way to really turn up the pressure on Russia could prove politically difficult.
Hitting the energy sector is one option. Stricter sanctions might see an attempt to shut off the remaining flow of liquefied natural gas (LNG) sold from Russia to EU states.
Lithuanian finance minister Rimantas Sadzius said his country supported moves to further cut off Russia‘s banking system from the rest of the world. “This means further packages, 18th, 19th if needed,” he said in Brussels this week.
The EU’s sanctions on Russia need to be unanimously approved by all 27 national governments and renewed every six months, which has caused headaches. Hungary’s far right prime minister Viktor Orban has on several occasions flirted with blocking the rollover, only to relent at the last minute. The next cliff edge is approaching at the end of July.
Orban views himself as Trump’s man in the EU. For the moment it seems he has calculated that the US president wants sanctions to stay, to push Putin to cut a quick deal to end the war, something Trump is eager to sell as an early achievement of his second term.
Things will get tricky if Trump changes his mind about the benefits of keeping western sanctions in place.
EU officials have been studying possible ways to make sure the €200 billion worth of frozen Russian assets remains on ice should Orban follow through on his threats to block the renewal.
Where the ceasefire talks in the Ukraine war will stand when the vote to maintain EU sanctions on Russia comes up again in 2½ months is impossible to predict.
