BREAKINGVIEWS-Europe and Trump risk Russian sanctions showdown

The author is a Reuters Breakingviews columnist. The opinions expressed are his own. Updates to add graphic.

By Pierre Briancon

BERLIN, Feb 17 (Reuters Breakingviews) - Donald Trump says he doesn’t like economic sanctions. The U.S. president has however hinted he might use that weapon to force his Russian counterpart Vladimir Putin to the negotiating table and try to strike a deal on Ukraine. With the two men now planning to meet, the question is whether Trump might soften or lift altogether the measures imposed by Washington and its Western allies since Russia annexed Crimea in 2014 – and tightened since Putin invaded Ukraine in 2022. That would help Moscow shore up the Russian economy and repair its military – and add to Europe’s strategic problems.

In the last three years the EU, the U.S. and the G7 group of industrialised nations separately decided their sanction packages, but the measures were broadly in sync. Most trade with Russia was banned, the country’s currency reserves were frozen, Russian banks were cut off from international payment systems and dozens of Russian officials and businessmen were individually sanctioned. The Russian economy has kept growing but it is overheating due to the stimulus of military spending, at around 10% of GDP and rising.

Trump could lift U.S. sanctions unilaterally. He might want to do this either to reward Putin for agreeing on a truce, or to pressure Ukraine and its European backers, if they are reluctant to agree on the offered deal. And the lifting can be modulated, with pressure applied gradually.

Europe would not be powerless. Its own sanctions arsenal is strong after 15 ever tighter packages of measures. The EU has cut its dependence on Russian energy from the pre-2022 days when Moscow supplied 40% of the bloc’s gas imports. And it controls most of the 300 billion euros of Russian currency reserves frozen in the wake of the Ukraine invasion. Furthermore, any sanctions dilution would need the agreement of all the EU’s member states.

It’s easy to see how such a unilateral action by the U.S. might divide Europeans. The EU and UK would have to make sure they stick together. Oil majors like TotalEnergies TTEF.PA or BP BP.L would lobby their governments as their rivals across the Atlantic resume business with Russia. And industrial groups in the bloc might hanker after cheap Russian piped gas: local prices of the fuel for March delivery have dipped by 10% since February 12.

Europeans have many arguments to encourage Trump to rethink. Would he like to see Europe increase its import of Russian liquefied natural gas, driving down prices and replacing the American LNG he wants the bloc to buy? Would he be happy to see U.S. chips end up in Russian missiles? If the American president fails to be convinced, the EU will find it hard to remain the sole sanctioning party against the adversary camped at its door.

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CONTEXT NEWS

The U.S. could use “economic tools of leverage” and “of course military tools of leverage” if Russia does not agree to a good peace deal with Ukraine, Vice President JD Vance said in a Wall Street Journal interview published on February 14.

Vance also urged Europe to spend more on defence, as he arrived in Europe to take part in the Munich Security Conference.

German defence group Rheinmetall’s shares were trading at 876 euros as of 0910 GMT on February 17, compared to 728 euros on February 12.

European gas for March delivery as per the Dutch TTF hub was trading at around 50 euros per megawatt hour on February 17, compared to over 55 euros per MWh on February 12, the day that the Kremlin said Russian President Vladimir Putin and U.S. President Donald Trump discussed ending the war in Ukraine.