Europe fears economic consequences if Russia is heavily sanctioned

Concerns raise prospect of splits with US over penalties should Moscow decide to escalate situation with Ukraine

A Russian tank rolls during military drills at the Molkino training ground in the Krasnodar region on December 14. AP

Concern among some big European nations about economic consequences raises the risk of a split with the US on how strongly to hit Russia with sanctions if it invades Ukraine, sources say.

Western allies are united in wanting to prevent a war as they enter talks this week to defuse tension with Russia, warning it faces massive penalties for any incursion into Ukraine.

Actions that have been discussed include export controls, curbing Russia’s access to technology and even cutting it out of the global system for financial payments.

But while the major Western European members of the EU remain committed in principle to a significant response, some have voiced worries with the US about the potential for damage to their own economies, the sources said.

The bloc is still working through economic and legal assessments of possible sanctions, they said.

European nations also worry that Russia would probably retaliate, possibly even cutting crucial gas supplies to a continent already dealing with record high energy prices.

Any EU-wide response would have to be unanimously agreed to by all 27 member states, a group with differing views on Russia.

The US has been consulting with European nations before the Russia talks, including the Nato grouping of France, Germany, the UK and Italy.

It has also held talks with Eastern European states.

Translating well co-ordinated words into a joint agreement on some of the measures being explored could prove tricky, the sources said.

The differences underline the challenge the US and its allies face as they try to pressure Russian President Vladimir Putin into reversing his troop build-up near the Ukraine border.

The countries have discussed options including cutting Russia out of Swift, the international payments system.

Others include limiting Russian banks’ ability to convert currencies and imposing export controls on advanced technology used in aviation, microchips and other parts, as well as computers and other consumer goods in more extreme scenarios.

The curbs could hit items ranging from aircraft avionics and machine tools to smartphones, games consoles, tablet computers and televisions, another source said.

Under some action, Russia could face export controls as stringent as those for Cuba, Iran, North Korea and Syria, which have been largely cut off from global trade and financing, the source said.

One former official with ties to the current US administration said a point of concern was how much Germany, which has just completed the Nord Stream 2 gas pipeline from Russia, would be on board.

The recent departure of Angela Merkel as German chancellor after 16 years has left Europe without a leader who can steer the EU into an agreement and engage directly with Mr Putin, the source said.

The Nord Stream 2 pipeline has not started pumping gas and is still awaiting regulatory approval from Berlin and Brussels.

“We are co-ordinating our approach closely with transatlantic and other like-minded partners,” EU foreign policy chief Josep Borrell said on Sunday in a blog post.

“There is no security in Europe without the security of Ukraine.”

Officials from Russia and the US gather in Geneva from today, with a Russia-Nato council meeting also on the schedule for this week, and talks in Vienna under the Organisation for Security and Co-operation in Europe.

Mr Putin has said he does not plan to invade Ukraine, but is also demanding that Nato provide him security guarantees.

US officials are pinning their hopes for common ground in the talks on issues such as arms control and greater communication between their militaries, sources say, given the Nato guarantees that Mr Putin seeks will not be considered.

They are willing to explore reciprocal restrictions on strategic bombers and ground-based military exercises, a senior administration official said.

But the US will hold off on making firm commitments during the talks, and plans discussions with allies before any agreements, the official said.

It will not negotiate reducing troops in Eastern Europe, despite an NBC News report.

Russia is not optimistic before the meeting, deputy foreign minister Sergei Ryabkov told Interfax. He said the country’s negotiators wanted a quick resolution.

US Secretary of State Antony Blinken also told ABC News on Sunday that he did not expect a breakthrough.

Intelligence assessments and satellite images show there are now more than 100,000 Russian troops in the vicinity of Ukraine.

Russia has also developed capabilities to quickly send more, from one to two weeks, a military assessment seen by Bloomberg shows.

Russia has shown no sign of de-escalating and is increasing efforts to hit Ukraine with disinformation, officials say.

One source said a separate military assessment pointed to the possibility that Russia could move into the Donbas region in eastern Ukraine before spring, rather than a large-scale invasion from several locations.

Ukraine and Russia have been in conflict since Mr Putin responded to the 2014 Ukrainian revolution that removed the pro-Moscow president by seizing Crimea.

Russia also backed separatists in eastern Ukraine by sending personnel and weapons.