Germany has emerged as the main roadblock to broaden European Union sanctions against Russia by targeting the country’s biggest bank and its energy sector.
Berlin is the leading power resisting efforts to add Sberbank PJSC to the list of Russian financial institutions cut off from SWIFT -- the bank messaging system behind much of global trade -- according to multiple diplomats familiar with the matter and documents seen by Bloomberg.
Sberbank, which holds about half of Russian retail deposits, was excluded from the initial list of banks being removed from SWIFT as part of a decision to shield energy-related transactions, but calls to strengthen penalties from member states in central and eastern European have grown as Russia intensifies attacks on Ukraine.
Documents show that Germany has repeatedly urged caution over the move during diplomatic meetings that have taken place in recent days, including among ministers. Chancellor Olaf Scholz has also come out publicly, calling for restraint on sanctions that could impact energy.
He said this week that he opposes cutting off supplies from Russia, calling deliveries of oil and gas of “essential importance” to the European economy and making clear that continuing energy imports is a “conscious decision.”
Germany’s stance risks creating a split in a key aspect of allies’ efforts to punish the Kremlin over its war on Ukraine. President Joe Biden announced on Tuesday that the U.S. will ban imports of Russian fossil fuels including oil, in a move that was in part matched by the U.K.
After Germany’s surprise pledge to deliver weapons to Ukraine and accelerate defense spending, the country is again drawing criticism as it seeks to protect its economy, which relies on Russia for more than half of its gas supplies and more than a third of its oil.
“Germany has done a heroic deed? No, you are doing too little,” Ukraine’s Foreign Minister Dmytro Kuleba wrote in a commentary in the Welt newspaper on Wednesday.
German officials are aware that pressure could increase to target energy supplies, but are cautious about escalating tensions at the moment and see that position supported by other member states, according to people familiar with the government’s thinking.
Finance Minister Christian Lindner has said discussions on additional financial sanctions are ongoing and nothing can be ruled out.
One of the EU diplomats said that other major western European governments, including Italy, would align behind the SWIFT move if there was a united position. Senior EU officials also support the measure, one of the people said.
Another official said that technical work on Sberbank and SWIFT was ongoing. Gazprombank is another entity that has so far been exempt from the measure.
Germany has also raised concerns over advanced proposals to restrict access to ports, arguing that the measure could hit trade in goods that haven’t been sanctioned, according to EU diplomats and one of the documents.
Germany and others are also opposed to the EU following the U.S. and the U.K. in banning oil imports from Russia. European nations rely more heavily on Russian fuels than the U.S. and governments are concerned about the impact on businesses and consumers already buckling under surging prices.
Oil continued its rally above $126 a barrel on Wednesday. Futures in New York have soared more than 35% since the invasion of Ukraine. Russia is the source of more than a quarter of Europe’s oil imports, according to the European Commission.
As part of a strategy to wean the continent off Russian energy, the EU’s executive arm noted that there are more potential alternatives for oil and coal supplies than for gas, where Russia provides more than 40% of the EU’s total consumption. The situation is even more extreme for Germany.
French Finance Minister Bruno Le Maire noted this week that the initial decision to exclude some Russian banks from SWIFT was agreed by all 27 EU member states, taking into account varying levels of dependence on Russian gas.
As the current holder of the presidency of the EU, France is acting as a mediator and hasn’t publicly taken a stance.
While Sberbank and the Russian Central Bank were initially spared, “all options are on the table,” he told broadcaster BFM TV this week. “All decisions are effective if they are taken in European unity.”
©2022 Bloomberg L.P.
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