FXStreet (Guatemala) - Analysts at Brown Brothers Harriman explained that the EU prepares for stage 2+ sanctions against Russia.

Key Quotes:

“The European Union is on the verge of announcing new broader sanctions against Russia. They will not go as far as stage three sanctions, which could include sanctions on whole sectors of the Russian economy, according to some leaked press accounts”.

“Some thing more than stage two sanctions, which includes travel bans and asset freeze, will likely be delivered, but still shy of stage three”.

“European officials seem to be playing up the tactical advantage of blurring the stage two and three distinctions, but it is difficult to know whether it is simply making a virtue out of necessity, given the reluctance of some southern and western members to support stiffer sanction”.

“The news leaks suggest four elements are being considered by the EU. First, new project funding by the European Investment bank would cease. Second the EU will likely broaden the legal basis for the sanctions to allow additional escalation if Russia continues not to cooperate. Third, the EU may cut Russia off from bilateral aid programs, mostly from the European Neighborhood and Partnership Instrument (which is the primary vehicle for European aid to non-EU countries in eastern Europe and Northern Africa). Fourth, the EU will look to other measures, like restricting new investment in Russia”.

“Reports suggest that Merkel has been a key advocate of toughing the EU's stance toward Russia”.

“The US has been encouraging this as well and earlier this week hosted EU ambassadors and briefed them on intelligence purporting to demonstrate Russia's heavy weapon provisions, including tanks and missile, to the rebels in the eastern part of Ukraine”.

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