No quick deal in sight as EU countries start talks on new Russia sanctions

© Reuters. FILE PHOTO: European Commission President Ursula von der Leyen attends a news conference in Brussels, Belgium February 16, 2023. REUTERS/Johanna Geron

By Gabriela Baczynska

BRUSSELS (Reuters) -European Union states were holding a first discussion on Wednesday on proposed new sanctions over Russia's war in Ukraine that would target Chinese and Iranian firms and allow export curbs on third countries for busting trade restrictions.

Talks among the EU envoys were set to be heated, according to one diplomat, with Russia hawks upset the plan does not go far enough but others wary of damaging their international ties.

Widely differing perspectives mean a quick deal is not expected, several diplomats said.

The EU's chief executive unveiled the plan on a symbolic trip to Kyiv on Tuesday - a counterbalance to annual celebrations in Moscow of the World War Two victory over Nazi Germany that President Vladimir Putin likens to his invasion of Ukraine.

European Commission President Ursula von der Leyen said the new sanctions would focus on cracking down on the circumvention of Russia trade curbs already in place, and were designed "in very close coordination" with Group of Seven nations.

"If we see that goods are going from the European Union to third countries and then end up in Russia, we could propose to the member states to sanction those goods' export. This tool will be a last resort and it will be used cautiously," she said.

She added the EU would stop transit via Russia of more of its exports, including advanced tech products and aircraft parts.

Diplomatic sources familiar with the proposal - drafted by von der Leyen's Commission - said it also included blacklisting "tens" of new companies, including from China, Iran, Kazakhstan and Uzbekistan.

The new sanctions would highlight that oil tankers are not allowed to offload in high seas or arrive in ports with their GPS trackers off, an attempt to push back against flouting G7 restrictions on trading Russian oil, according to the sources.

Part of the push relates to growing concern, particularly in Spain, over the risk of spills as the "ghost" fleet moving Russian, Iranian and Venezuela oil grows.

"New EU measures will unfortunately do little to address the problem which is old, uninsured vessels performing STS (ship-to-ship transfers) outside the EU," Andrea Olivi, head of wet freight at commodities trader Trafigura, said. Olivi pointed to a fire last week on a tanker with no known insurance in waters off Malaysia as an example.

"The EU should put pressure on the International Maritime Organization (IMO) to introduce more stringent safety and insurance measures on older vessels.”

NO SWIFT DEAL SEEN

All 27 EU countries must agree for new sanctions to take effect in what would be the bloc's 11th round of such measures since Russia invaded Ukraine in February 2022.

It would mark the first time the bloc had targeted China over accusations of Beijing's role in the war, something China's foreign ministry warned the EU against.

A diplomatic source from an EU country hawkish on Russia was frustrated the Commission's proposal did not include stopping Russian diamond imports or nuclear energy cooperation.

The person said trade lost under the proposal was estimated to be worth up to 500 million euros ($550 million) compared to what von der Leyen said amounted to 11 billion euros in the previous round.

At the opposite end of the debate, a diplomatic source from a country critical of the sanctions said the proposal to target third countries was bound to trigger a fraught discussion.

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