Russia has threatened the European Union with tough reprisals in reaction to new economic sanctions. On Monday, Prime Minister Dmitry Medvedev hinted at a ban on Western airlines from flying over Russia should the proposed EU sanctions take effect. “Our skies are open to our partners. But if we are going to be restricted, we have to react,” Mr. Medvedev said.
The EU states agreed on further sanctions Monday evening, but when they would take effect was left open by Herman van Rompuy, president of the European Council, which represents the 28 member governments. The delay was to allow time to evaluate cease-fire agreements and the peace plan in eastern Ukraine, where pro-Russian rebels have battled government forces.
“Depending on the situation locally, the EU is prepared to review the sanctions agreed, either partially or completely,” Mr. Van Rompuy said in a written statement.
The new sanctions are designed to make it much more difficult for Russian state banks, armaments firms and oil-producing companies to have access to European credit. The European Union is also expanding the export ban on technology for oil production and restrictions on the export of products that can be used for both civilian and military purposes. Twenty-four more names have been added to the list of individuals with frozen bank accounts and travel bans.
Besides government-affiliated banks Sberbank and VTBund, the credit restrictions affect Russia’s biggest oil concern Rosneft and Transneft, the company responsible for oil pipelines and the Gazprom subsidiary Neft. In the extended bans on dual-use products, three armaments firms are affected by the EU sanctions: OAK, Kalashnikov and Oboronprom.
“Our skies are open to our partners. But if we are going to be restricted, we have to react.”
Moscow already played the airspace-ban card a few weeks ago in reprisal for Europe’s proposed sanctions. Western airlines would find a ban over Siberia an expensive business. The routes are of key importance, especially for flights going to China, Japan and Korea.
But for Russian’s biggest airline, state controlled Aeroflot, Moscow’s reprisal could have consequences too. For years, the only reason the company made even minimal profits was because it received payments for flyover rights of foreign competitors. In the first half of 2014 however, Aeroflot made its first loss in five years despite the “royalties.”
Mr. Medvedev announced that Russian companies affected by the sanctions could qualify for government support. Rosneft, which is affected by the sanctions’ restriction on access to international capital markets, has already asked for support to pay off debts running into billions. Moscow is also looking to build more of its own aircraft in the future. Similar attempts failed in the past, despite billions being pumped into aircraft manufacturing. Now, said Mr. Medvedev, they would “redouble their efforts” and become more independent of Boeing and Airbus.
The cease-fire in eastern Ukraine remains fragile, according to the Organization for Security and Cooperation in Europe.