The European Union decided on Friday February 25 to sanction Russian President Vladimir Putin and his Foreign Minister Sergei Lavrov by freezing their assets. This decision comes after the vote of a first part of economic sanctions against Russia, which invaded Ukraine on Thursday. However, within the 27 countries of the European Union, there are disagreements as to what action to take vis-à-vis Moscow: Lithuania wants the EU to toughen its tone while Germany is cautious.
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Lithuania asks to block Swift
Lithuania pushes its partners to move faster and that the consequences for Vladimir Putin are more painful. It could be Russia’s withdrawal from the Swift banking system. This interbank international payment system is a cooperative that makes it possible to streamline payments between countries. It works with payments in dollars and Russia depends a lot on it, especially for the export of its hydrocarbons. If Russia were excluded, the transfer of funds between Russian companies and their European partners would be strongly impacted. Everything would be slowed down and manual procedures would have to be found to transfer the amounts to be paid, which would take much longer. This withdrawal of Swift would therefore be very effective in the eyes of Lithuania.
While there are currently no plans to include Swift’s withdrawal in the second EU sanctions package, it could be part of a third tier. For the prime minister, also a former finance minister, it’s all about knowing when to apply it so that the pressure on Russia is maximum. Lithuania is also considering as a sanction measure to stop buying gas and oil from Russia so that the consequences are immediate.
Germany facing its dependence on Russia
The question of sanctions is also being debated in Germany, which is more cautious about the sanctions to be applied. The country is one of the largest foreign investors in Russia, with 25 billion euros per year. Berlin also fears possible responses from Moscow following European economic sanctions. Finance Minister Christian Lindner acknowledges that the sanctions are heavy and painful for Russia but he also does not want to put Germany in debt beyond 100 billion euros this year, a target that was already set before the conflict Russian-Ukrainian. Germany also has very strong economic ties with Russia, the fruit of years of weaving these economic ties: more than 3,600 German companies are based there, with 277,000 employees. This trade diplomacy that had prevailed for years has simply been shattered.
Berlin remains limited in its possibilities of sanctions. Energy measures, for example, are complicated by Germany’s heavy dependence on Russia. Indeed, 55% of its gas comes from Russia. Energy sanctions would therefore be at the expense of German households. On Tuesday, Olaf Scholz finally resolved to suspend the NordStream 2 project, at the request of members of his government, in particular the Greens, and Western powers. This new gas pipeline, the construction of which cost billions of euros and which was to increase imports of Russian gas into Germany, has therefore seen its commissioning suspended.
On the military side, Germany is not in a position to participate more than it already does in NATO forces, for lack of means and because of defective equipment. It therefore aligns itself with its partners.