EU Leaders Reach Political Deal to Extend Sanctions on Russia

By Laurence Norman Features Dow Jones Newswires

European Union leaders reached a political deal Thursday to extend the bloc's economic sanctions on Russia by a further six months, citing the failure of Russia to end the conflict in eastern Ukraine.

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The decision, which was widely expected, will be formally approved in coming days, likely early next week. It means the sanctions, which were due to expire at the end of July, 2017, will now continue until at least January 2018.

"Agreed. EU will extend economic sanctions against Russia for their lack of implementing the Minsk Agreement," European Council President Donald Tusk said on Twitter.

EU and Russian officials say the sanctions, which curtail defense, energy and financial ties, have harmed the Russian economy -- though Russia's economy appears to be adapting.

The EU and the U.S. have linked the economic sanctions to the February 2015 Minsk cease-fire accord, which aimed to end fighting between Ukraine's forces and Russia-backed separatists. Progress on the agreement has stalled, European diplomats say, meaning there was little real debate about sticking to the course and extending the sanctions.

The EU has also placed a travel ban and an asset freeze on 37 businesses and 150 people, including top aides to Mr. Putin, over the conflict in eastern Ukraine. On Monday it extended for a year sanctions linked to Russia's March 2014 annexation of Crimea.

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Russia's economy in 2014 entered a two-year recession, sparked by sanctions and plunging oil prices, but the World Bank forecasts it to grow 1.3% this year.

The European move comes as the U.S. senate last week backed a bill that would impose new sanctions on Russians linked to human-rights abuses, arms sales to Syria and cyberattacks. The measures also curtailed President Donald Trump's ability to ease sanctions, something he floated doing during the presidential campaign, causing consternation in the EU.

In a paper circulated last week, seen by The Wall Street Journal, the European Commission, the EU's executive, said its sanctions are still denting Russian imports of dual use goods and placing pressure on Russia's financial sector, though the commission acknowledged easier foreign funding conditions for Russian companies in recent months.

The bloc also said Russian counter-sanctions -- mainly on EU agricultural products -- was having only a minimal impact on the EU's economy. It said the combined effect of the EU's sanctions on Russia and the Russian countermeasures would have zero impact on EU economic output in 2017, after having a 0.1% drag in 2016.

Write to Laurence Norman at laurence.norman@wsj.com

(END) Dow Jones Newswires

June 22, 2017 18:02 ET (22:02 GMT)