How Russia Will Use Brexit to Fight Sanctions

By Editor, The Manila Times, Philippines Reprint | | Print |

Jul 6 2016 - FORECAST
EU sanctions against Russia are all but guaranteed to remain in place through 2016, but Moscow will work in the second half of the year to get them eased in 2017.

Moscow will step lightly, however, to avoid provoking its European rivals ahead of the next sanctions vote.

Europe is not the only region affected by Britain’s vote to leave the European Union. The decision will also have significant effects on Russia, especially where sanctions are concerned. As the Continent focuses on mitigating and managing the fallout from the Brexit vote, it probably will have fewer resources to devote to problems beyond the European Union, namely those in Ukraine, Syria and Nagorno-Karabakh — all areas where Russia plays a major role. The EU is also likely, at least in the immediate term, to have less interest in advancing its political and economic integration projects in the former Soviet periphery, such as the Eastern Partnership program.

Sanctions: Russia’s bugbear
Of particular import to Russia are the sanctions against it, which Moscow would like Europe to lift. The European Union first imposed the sanctions in March 2014, around the time that voters in Crimea resolved in a referendum to leave Ukraine and join Russia. The referendum was held in response to the February 2014 EuroMaidan uprising, which ousted then-President Viktor Yanukovich, an ally of Russia, in favor of a new pro-West government. When the European Union passed initial sanctions, they were limited to 21 people in Russia and Ukraine associated with the Crimea referendum. Beginning in May 2014, the European Union passed new sanctions related to the Russian-backed uprising in eastern Ukraine. These sanctions started as restrictive measures for associated individuals, but by September 2014 — when the fighting had intensified and after Malaysia Airlines flight MH17 was shot down — they expanded to include companies and broader sectors of Russia’s economy. Since passing the measures unanimously, EU member states have reviewed them every six months, agreeing to extend sanctions in June 2015, in December 2015 and again in July 2016.

In upholding the sanctions, the European Union has maintained solidarity with the pro-West government in Ukraine and kept pressure on Russia for more than two years. But recent signs suggest that the bloc’s unity on the issue is becoming strained. Even before the Brexit vote, certain Russia-friendly countries in the European Union — including Italy, Greece and Hungary — pushed for greater discussion and debate on prolonging Russia sanctions. The countries’ leaders argued against an automatic extension of sanctions, and Italian Prime Minister Matteo Renzi even co-hosted a recent economic forum with Russian President Vladimir Putin in St. Petersburg. Of course, the pro-Russia sentiment has not sufficed to break the EU unanimity in an actual vote. Nonetheless, it reveals growing uncertainty over the future of the sanctions — regardless of whether Moscow complies with the Continent’s demands to implement the Minsk accords.

A budding opportunity
Nothing will test EU unity more than negotiating Britain’s exit from the bloc. Since the European Union has already decided to extend sanctions through the end of the year, discord on the Continent will not affect Russia immediately. It does, however, raise the possibility that the European Union’s long-standing consensus on sanctions could break by the time the next vote occurs, probably in January 2017. The United Kingdom was one of the biggest proponents of maintaining strong economic pressure on Russia. Now that its status in the bloc is uncertain, other countries may be more willing to diverge from its position — and Russia is ready to take advantage of any rifts. To that end, Moscow will likely encourage the exit campaigns of anti-EU figures such as France’s Marine Le Pen and the Netherlands’ Geert Wilders while also ramping up its charm offensive on countries more critical of sanctions.

Even so, Moscow will be cautious in exploiting the divisions, well aware that any major action it takes — whether backing a military offensive in Ukraine or trying too aggressively to shape EU decision-making — could backfire and strengthen EU resolve against it. Furthermore, Russia is not immune to the economic repercussions of the Brexit, which crashed global markets. Despite the sanctions, Russia and the EU continue to conduct trade and financial activity with each other, albeit at reduced levels. As it is, Russia’s economy is already suffering the effects of low oil prices; a major political and financial crisis spreading throughout all of Europe is not in Moscow’s interests. Therefore, even as Moscow tries to capitalize on Europe’s rifts in time for the next sanctions vote, it will be careful not to overexert its influence. Lead Analyst: Eugene Chausovsky

©2016 STRATFOR GLOBAL INTELLIGENCE

This story was originally published by The Manila Times, Philippines