European sanctions against Russia

"Let's commit economic hari-kiri to defend the Empire"

What a pack of idiots. They are "worried" about Russia turning off the gas when they extend sanctions to Gazprom and do everything to provoke the bear.

No doubt Moscow will find an effective responce - quite apart from running away from the dollar, SWIFT etc and finding its own response with BRICS.

Russia Responds To The Latest European Sanctions: "You Leave Us No Choice"

Zero Hedge,

11 September, 2014

As usual, every European snaction (sic) has an equal and opposite Russian reaction. Here is how the Russian Foreign ministry responded to what van Rompuy announced earlier today would be a new round of Russian sanctions, which wil finally be enforced tomorrow. First from the Russian foreign ministry:

BY PASSING NEW ANTI-RUSSIAN SANCTIONS, EU EFFECTIVELY MADE CHOICE AGAINST PEACE PROCESS IN UKRAINE - RUSSIAN FOREIGN MINISTRY'S STATEMENT

And from Russia's European ambassador:

NEW EU SANCTIONS AGAINST RUSSIA LEAVE RUSSIA NO OTHER CHOICE BUT
TO GO FOR CERTAIN COUNTER-MEASURES - RUSSIA'S PERMANENT REP TO THE EU
CHIZHOV

EU SANCTIONS AGAINST RUSSIA DEVOID OF ELEMENTARY LOGIC, COMING SIMULTANEOUSLY WITH DE-ESCALATION OF UKRAINIAN CRISIS - RUSSIA'S AMBASSADOR TO EU CHIZHOV

Below is the official statement, Google-translated:

In connection with the statement of the President of the European Council Herman Van Rompuy from September 11 regarding the introduction of a new package of anti-Russian sanctions, we can state the following.

By taking this step, the EU has actually made a choice against the peaceful settlement of the Ukrainian domestic crisis, whose support was expected of all responsible powers in Europe.

Today Brussels and heads of EU member states should give a clear answer to the citizens of the European Union why they put them at risk of confrontation, economic stagnation and the loss of jobs.

And the punchline:

Finally, give peace a chance.

So Obama channels Dubya and Putin channels John Lennon. The New Normal sure is strange.

Poland Says Russian Gas Deliveries Tumble By 45%; Europe To Launch Sanctions On Friday, Russia Will Retaliate

Zero Hedge,

11 September, 2014

Yesterday, when Gazprom was supposedly "troubleshooting its systems", we reported that in what was the first salvo of Europe's latest cold (quite literally, with winter just around the corner) war, Poland complained that up to 25% of its usual gas deliveries from Russia had been cut. Russia indirectly hinted that this was also a result of Ukraine using "reverse flow" to meet its demands, with Europe allowing Kiev to syphon off whatever gas it needs without paying Gazprome for it. It also led Poland to promptly admit it would halt reverse flow to the civil-war ridden country. Fast forward to today when Polish financial website Biznes reports that things are going from bad to worse in Russia's energy retaliation war, after Poland claimed a 45% shortfall in Russian natgas imports as of Wednesday.

Not surprisingly, Gazprom has said that is not the case, which leaves two options: either someone is lying, or the Ukraine is quietly, and illegally syphoning off gas destined for Europe.

More:

Poland's listed natural gas group PGNiG noted Wednesday natural gas deliveries from the east 45% below the ordered level, the firm said in a Thursday press statement. Wednesday marks the third straight day when Poland claims to have received less gas than ordered from Russia's Gazprom. Poland claims that shortfall forced a shutdown of re-export to gas-strapped Ukraine and an increase in imports from other directions to compensate the loss.

"Under the Yamal contract, PGNiG has the right to collect volumes lower or in line with the maximal daily amounts contracted for particular entry points," PGNiG said. "Volumes ordered by PGNiG were below the maximal level - that is line with the contract. Nevertheless, they have not been realized by OOO Gazprom Export."

In order to make up for the missing volumes from the east, PGNiG claims to have launched supplementary gas deliveries via Lasow at the German border and via Cieszyn at the Czech border, the firm noted in its statement.

Additionally, on Thursday PGNiG launched natgas supply through the Mallnow point at the Yamal pipeline on the German border, PGNiG said.

A spokesperson for PGNiG, Dorota Gajewska, refused to indicate if the level of Russian deliveries constituted a reduction from any prior periods, reiterating only that delivered volumes are below the contractually requested level, she said in an interview for broadcaster TVN24.

On Wednesday PGNiG claimed that deliveries had fallen 20% short of order on Monday and 24% short of order on Tuesday.

The firm said it was "investigating" the reasons behind the delivery shortfall, in particular whether it is of technical or commercial nature, and said it was compensating for the volumes with imports from other directions.

On Wednesday PGNiG still hasn't received any explanation from Gazprom, the firm said.

Deliveries to PGNiG's clients are being carried out without disruption, and there is no need to tap undergroung gas storage facilities, filled to 100% of their capacity (around 2.6 bcm).

PGNiG's long-term Yamal contract with OOO Gazprom Export, dating back to 1996 and renegotiated in 2010, provides for annual natural gas imports of 10.24 bcm, drawn at Drozdowicze, Wysokoje & Polish points along the Yamal pipeline. The contract is based 85% on a take-or-pay formula. PGNiG will seek a gas price reduction during a renegotiation window that opens in November 2014.

So as the new balance of power is suddenly dawning on Europe, as is the realization that Putin does have all the leverage (as otherwise Gazprom would never suicide itself in a way as to show it can proactively cut European gas supplies, even if the recipient is a country that has been so vocally beligirent toward Russia as Poland), the Europeans have decided there is no point in waiting any longer, and as was blasted moments ago:

BERLIN - EU DIPLOMAT SAYS NEW SANCTIONS AGAINST RUSSIA TO COME INTO FORCE ON FRIDAY

More from Reuters:

European leaders spoke early on Thursday and agreed to push ahead with a package of sanctions against Russia by the end of the week, due to its aggression towards Ukraine, the spokesman for British Prime Minister David Cameron said.

"This morning the prime minister took part in a joint call with several fellow European leaders; president (Herman) Van Rompuy, Chancellor (Angela) Merkel, president (Francois) Hollande and prime minister (Matteo) Renzi," the spokesman said.

"(They spoke) to discuss the subject of sanctions against Russia in the context of Ukraine and agreement to proceed with the implementation of the sanction package that was agreed earlier in the week."

Which means that the gloves are now fully off and Russia is content that it will be cold enough soon enough to give Putin even more of a first mover advantage, and thus negotiating leverage while the part of Europe, and all of Ukraine, shivers in the cold.

Sure enough:

RUSSIA WAITS FOR SANCTION DETAILS TO DECIDE HOW TO RETALIATE

RUSSIA WILL RESPOND TO NEW EU SANCTIONS: LUKASHEVICH

RUSSIA SAYS READY TO RESPOND TO NEW U.S. SANCTIONS

And:

Agence France-Presse        ✔ @AFP

Follow

#BREAKING Russia has drawn up second set of anti-Western sanctions: Putin aide

12:35 AM - 12 Sep 2014

In other words, Russia's staggered gas reduction, which we predicted last weekend would happen momentarily, as it has, is not a retaliation but merely a side-effect. One wonders just how bad things will escalate to if in addition to its gas Europe loses, for example, access to Russian airspace, or worse.

And the full wrap of the most recent events surrounding Ukraine and Russia, via Bloomberg:

• EU to impose new Russia sanctions tomorrow, will lay out conditions for eventually suspending measures
• Russia says will retaliate against new sanctions, says  they are “unfriendly policy”; may target cars, textiles: RIA
• Ruble falls to record vs dollar
• U.S. sees Ukraine as arena for geopolitical battles, Russian foreign minister says in interview to Itar-Tass
• Ukraine needs to regroup, strengthen army; must open way to NATO membership, Parliament speaker tells Fokus magazine
• Donetsk airport shelled by rebels overnight: Ukraine defense ministry
• Gazprom may face biggest decline in European gas revenue in five years; sales to EU, source of 40% of rev., forecast to fall >10% to ~$55b this year, co. officials say
• Putin orders war readiness test for East Russian regions:     Interfax
• McDonald’s being taken to court by Russia’s consumer-safety regulator for allegedly understating caloric values, microbial contamination in products; suit delayed as chain defends calorie count
• Ukraine seeking to prevent Russian cos from getting licenses to run 3G networks in planned auction

Summary: tomorrow's latest round of sanctions and countersanctions should be interesting

Finance, energy & defense sectors: EU and US set to impose new Russia sanctions

RT

11 September, 2014

Barack Obama says he is joining the EU initiative to impose a new round of sanctions on Russia. Both Washington and Brussels say the sanctions will target finance, energy and defense sectors – yet can be revoked if the situation in Ukraine improves.

The US is to provide details of their sanctions on Friday.

“We will deepen and broaden sanctions in Russia’s financial, energy, and defense sectors. These measures will increase Russia’s political isolation as well as the economic costs to Russia, especially in areas of importance to President [Vladimir] Putin and those close to him,” US President Barack Obama said in a statement on Thursday.

The US says that Russia has sent heavily armed forces to Ukraine. Obama added that the US may withdraw sanctions if Russia fulfills obligations under the Minsk agreement.

"We are watching closely developments since the announcement of the ceasefire and agreement in Minsk, but we have yet to see conclusive evidence that Russia has ceased its efforts to destabilize Ukraine," Obama said. "If Russia fully implements its commitments, these sanctions can be rolled back."

While details officially remain unknown, a Reuters source has alleged that the US intends to sanction Russia’s largest bank, Sberbank, and tighten restrictions on other Russian banks.

Previously, access to the US capital market was restricted for five Russian banks – VTB, Gazprombank, Bank of Moscow, Russian Agricultural Bank and Vnesheconombank (VEB). The Aug. 1 sanctions restricted Sberbank’s activity in the EU.

EU sanctions to take immediate effect on Friday

As for the European Union, the bloc will list their new limitations in the official journal Friday, which will mean they will come into effect immediately. Brussels will add 24 individuals to the list which blocks travel to the EU and asset freezes. Russian leaders and businessmen, as well as politicians in Crimea and the Donbass, will be added to the blacklist.

According to the official document, the EU will halt services Russia needs to extract oil and gas in the Arctic, deep sea, and shale extraction projects.

Three of Russia’s major energy companies and the country’s three largest defense entities will be restricted from raising long-term debt on European capital markets, Van Rompuy said.

Five major Russian state-owned banks will also be banned from any long-term (over 30-day) loans from EU companies.

Major Russian defense companies will be barred from debt refinancing, and the EU will also ban the export of any technology considered military “dual-use” to nine Russian companies.

Meanwhile, an EU source told RIA-Novosti news agency that the fresh European Union sanctions won’t affect the Russian gas sector.

Sberbank.(Reuters / Alexander Demianchuk)

"The energy sector affected by these sanctions is limited to the oil sector," the source said.

On July 16, the US blacklisted several defense sector companies include Almaz-Antey Corporation, the Kalashnikov Concern and Instrument Design Bureau, as well as companies such as Izhmash, Basalt, and Uralvagonzavod.

If the EU follows the US lead on hitting Russian companies that also supply the Russian military, the above mentioned will be blocked from debt financing.

The European Commission has agreed to amend or suspend the sanctions in accordance with progress in Ukraine. A ceasefire was agreed by the Ukrainian government and rebels in the East on September 5.

“Thus, if the situation on the ground can be trusted, the European Commission and the EU Foreign Service will request to amend, suspend, or cancel sanctions, either in part or in full,” Van Rompuy said, as quoted by ITAR-ITASS.

Media sources suggest Gazprom Neft, Transneft, and Rosneft will all fall under Friday’s sanctions.

Gazprom Neft is the oil subsidiary of Russian gas giant Gazprom.

Transneft is Russia's state-owned oil pipeline company that exports all of Rosneft’s crude oil, and exports 56 percent of Russia’s total crude exports

Rosneft, Russia’s largest oil producerwas put on the US sanctions list on July 16 and later added to the EU list on July 29. In July, Russia’s largest independent natural gas producer, Novatek was also added to the blacklist which bans the export of hi-tech oil equipment needed in Arctic, deep sea, and shale extraction projects to Russia.

Russian respose to 'de facto choice against peace'


Russia said it will respond to Western sanctions with equal strength, and last week Prime Minister Dmitry Medvedev said that closing Russian airspace to European airlines was an option being considered.

President Putin’s spokesman, Dmitry Peskov, said that new EU sanctions make no sense, as they are being introduced when Russia is making vigorous efforts to stop the bloodshed in southeastern Ukraine. 

“The EU doesn’t see, or prefers not to see, the real state of events in [Ukraine’s] Donbass and doesn’t want to know about the efforts aimed at settling the conflict,” Peskov said. 

“We regret the EU’s decision to impose new sanctions. We repeatedly expressed our disagreement and incomprehension about the sanctions that were implemented earlier, which we considered and will consider illegal,” he added.

Russia’s Foreign Ministry said Thursday that the EU was apparently very much against any peaceful resolution of the crisis in Ukraine.

“By taking this step, the European Union has de facto made its choice against a peaceful resolution of the inter-Ukrainian crisis,” the ministry said in a statement.