EU leaders split on where to go next on Russia sanctions

Good morning, after a rather long day of summitry.

The EU summit, which continued long into the night, revolved around the question of how Europe should respond to Ukraine’s calls for more sanctions on Russia, particularly on energy imports. President Volodymyr Zelensky addressed leaders via video link and expressed gratitude for the measures taken so far, but he also called on Europe to do more, according to a person familiar with the discussions.

Earlier in the evening, US president Joe Biden joined EU leaders — after also meeting some of them at the Nato and G7 summits yesterday — for a one-and-a-half hour discussion in which he highlighted the dire humanitarian situation in Ukraine and the need to keep transatlantic unity and alignment on sanctions, even as he expressed understanding of the difficulties for Europe in reducing its energy dependency on Russia.

On personnel issues, Nato extended the term of its secretary-general, Jens Stoltenberg, for another year. On the EU side, leaders confirmed Charles Michel for another 2.5 years as council president.

Elsewhere in Brussels, regulators struck a deal on the Digital Markets Act, which is a piece of legislation targeting big online platforms such as Google, Apple and Amazon.

We’ll also look at why UK prime minister Boris Johnson’s trip to Brussels may have fallen short of his expectations.

Much ado about energy

Last night’s discussion on extra sanctions followed an already familiar pattern: Poland and the Baltic states joined Ukraine’s calls for energy sanctions, while the rest of the bloc expressed wariness at that step, write Valentina Pop and Sam Fleming in Brussels.

“The ones who want to go further and those calling for a reality check after four rounds of sanctions are still very apparent,” said an EU official familiar with the discussions.

In their conclusions, leaders said the bloc “remains ready to close loopholes and target actual and possible circumvention, as well as to move quickly with further co-ordinated robust sanctions on Russia and Belarus”.

An example of loophole-closing efforts came yesterday, with the G7 decision to target Russia’s ability to use its gold reserves as a way of blunting the impact of the sanctions regime on its economy.

As for further sanctions, here are a few of the options still under discussion among leaders and ambassadors for the days and weeks to come:

• Oil and gas ban: Opponents of hitting oil exports argue that the effect of such a measure could simply be to drive up prices while encouraging Putin to sell his crude elsewhere. Germany has also made it clear it opposes any sudden clampdown on Russian gas exports because it would risk triggering a recession. A gradual policy of diversifying EU gas supplies away from Russia could be even more efficient than an outright ban as it would not have a perverse effect on the price, say German officials.

• Bottom-up pressure: MEPs belonging to parties in government in Germany signed a letter seen by Europe Express that calls for an immediate ban on Russian energy imports. Drawn up by Spanish liberal MEP Luis Garicano, the letter collected 103 names, including five of the seven members of Germany’s ruling liberal party FDP.

• Other export controls: One idea being explored as part of a possible fifth package of sanctions would be to target elements of Russia’s non-energy trade with the EU, on top of the existing export control regime.

• No ships, no trucks: The EU has been examining whether to take the UK’s route and bar Russian shipping from the union’s ports. Hawkish member states including Baltic countries and Poland have also argued in favour of restricting road freight transport to and from Russia and Belarus.

• More de-Swifting: The decision to eject seven Russian banks from the Swift messaging network left a number of lenders unaffected, including the country’s largest, Sberbank. Hawks would like to widen the range of banks affected.

• Crypto crackdown: Member states have been debating a tougher crackdown on Russia’s ability to use crypto assets to circumvent western measures, although some specialists question whether the assets are really a major vehicle for dodging sanctions.

Chart du jour: Europe-bound LNG

As first reported in the FT yesterday, Joe Biden is set to announce a plan to ship to the EU another 15bn cubic metres of liquefied natural gas this year, which are expected to replace Russian LNG imports.

Boris left outside the Brussels bubble

Boris Johnson had let it be known that he would welcome an invitation to the European summit to join US president Joe Biden, writes Andy Bounds in Brussels.

But the British prime minister had to make do with appearances at Nato and the G7. He did grab a few minutes with Ursula von der Leyen, the commission president. But their accounts of the meeting differed. Both issued statements that they talked about Ukraine and sanctions.

The UK government added that they discussed “ongoing issues with the Northern Ireland protocol”, the main bone of contention between the EU and the UK since Brexit. Not so, an EU official said. Johnson mentioned it but there was no discussion.

Brussels has agreed to changes to ease the trading arrangements between Great Britain and Northern Ireland but Johnson says they do not go far enough and has threatened to suspend most checks on goods.

His remarks at the weekend comparing Britain’s vote to leave the EU with Ukraine’s war of liberation against Russia stung many EU leaders.

So at one point he cut a lonely figure, hands awkwardly stuck in pockets, ahead of the group photo of Nato leaders as President Emmanuel Macron of France exchanged greetings with his peers. “It was like the first day of kindergarten where you don’t know anyone,” winced one EU diplomat.

Then Macron hogged the press room for an extended Q&A while Johnson was waiting his turn. Eventually the disheveled prime minister entered from the back of the room and started speaking before some journalists had taken their seats, declaring he had a plane to catch.

Last-minute tech reg drama

In the final hours of yesterday, regulators in the EU capital staged something of a sideshow to seal a deal on the Digital Markets Act, the first leg of the internet rules update targeting mostly US companies, writes Javier Espinoza in Brussels.

The EU parliament, the commission and member states met yesterday evening to iron out the final details of the DMA, which is the rule book telling digital platforms such as Google or Amazon how they must not abuse their market power in respect to smaller rivals.

A second piece of legislation, the Digital Services Act, is still being negotiated, even though the two were first put forward as a package back in December 2020.

Co-legislators had been keen to keep the date on the political deal on the DMA, even if it clashed with the three summits in Brussels yesterday. But even as Brussels approved the new rules, there were some last-minute battles. They included:

• How much to restrict the use of targeted advertising, with some still pushing for an outright ban and others arguing that minors should be protected from the controversial practice, which will now be covered in the DSA.

• Andreas Schwab, the German MEP spearheading the legislation, was pushing for broader scope to cover not only app stores, as in the commission proposal, but also other core platform services. “For a business [it means] that for its own offer in an app store there are clear rules on what you have to pay for, what the rules for the order are, and that you know somehow how you are ‘classified’,” Schwab said. “For a user: that all users of the same quality can access in the same manner.”

• MEPs also argued whether group chats could interact with each other in competing messaging services such as WhatsApp. There will be a staggered introduction for certain group chat features over four years.

While some thought the timing of the meeting was odd, officials insisted on going ahead with the new rule book as it sent a strong message about the democratic process.

Margrethe Vestager, the commission vice-president in charge of competition and digital policy, said that large digital platforms “have prevented businesses and consumers from the benefits of competitive digital markets” but that they “will now have to comply with a well-defined set of obligations and prohibitions”.

Google said that while it supports “many of the DMA’s ambitions around consumer choice and interoperability, we’re worried that some of these rules could reduce innovation and the choice available to Europeans”.

For a comprehensive read on the DMA deal, be sure to see this piece.

What to watch today

1. EU leaders meet for the second day of the summit to discuss energy market options

2. US president Joe Biden and European Commission president Ursula von der Leyen hold a joint press statement on energy partnership

Smart reads

• Tripling down on green: The Centre for European Reform argues not for a doubling but a tripling down on green investments in Europe, including by fresh joint borrowing modelled on the Recovery and Resilience Facility “to focus on energy that is green and secure, that is on projects that can rapidly reduce the need for imported fossil fuels. That would make Europe as a whole less vulnerable to Russia, and will allow all countries to invest in energy and defence with the same boldness that Germany has done.”

• Ukrainian will to fight: While Volodymyr Zelensky’s leadership has impressed many in the west and resonated far beyond the borders of his country, a major risk for Ukraine is that he becomes a single point of failure for the resistance. His death or capture could prove fatal to the overall Ukrainian effort, writes the Royal United Services Institute.

• A lot of fraud, some corruption: The first annual report of the European Public Prosecutor’s Office details the most frequent types of fraud (agriculture expenses, VAT, customs declarations) encountered by its prosecutors. Just four per cent of the over 500 investigations the office has launched so far are focused on alleged corruption of public officials. The estimated overall damage to the EU budget of all these cases is €5.4bn.