by Katinka Barysch

Last week, Russia belatedly signed up to a timetable for pulling back its troops from the ‘buffer’ zone in Georgia. The EU, and its current president, Nicolas Sarkozy, deserve credit for having brokered the initial ceasefire and then pushing hard for Russia to follow the terms. The important question now is how the EU will respond in case tensions do not ease, or even grow further.

At its emergency summit on September 1st, the Europeans managed to stick together in an unprecedented condemnation of Russian aggression. To signal their willingness to act, they froze negotiations on their new Partnership Agreement with Russia. This decision did not sway Russia’s plans. But, being used to a squabbling and uncritical EU, Moscow will have taken note of the Europeans’ relatively strong reaction – relative because compared with the tough rhetoric of some US politicians the EU’s reaction looked measured. Those who criticise the EU for this miss the point. The EU cannot be a mediator in the conflict and take sides at the same time. The EU’s mediating role was all the more effective because it was backed by an angrily growling America that openly backed Saakashvili. The Americans found it easier to be firm because they could rely on the EU to do the negotiations.

The latest ceasefire agreement, of course, will not end the tensions. Already, there are new disagreements about how many Russian soldiers should remain in Abkhazia and South Ossetia, and where EU monitors will be allowed to go. Moreover, many people, and not only in Ukraine, Poland or Estonia, predict that Russian efforts to control its neighbourhood will not stop at the border of South Ossetia.

So the EU needs to continue its debate about what kind of tools it has available to ratchet up the pressure if necessary.

Most of the measures that politicians and commentators have discussed since August 8th are more likely to harm European interests without making Russia change its ways. Moreover, any panicky over-reaction would make Russia look scarier than it is, which Russian leaders may secretly enjoy.

Economic sanctions are almost a non-starter. Almost 30 per cent of the gas consumed in the EU comes from Russia, and the EU is in no position to replace these supplies in the foreseeable future. Acutely aware that this dependence is mutual, Russian leaders have been notably careful not to mention energy in their angry exchanges with the West. The EU could try to limit Russian sales of non-energy goods or Russian investments in EU countries. But in the absence of a UN mandate, such steps would violate the EU’s own rules for openness and non-discrimination. Economic sanctions risk undermining the principles on which the EU is based. And they could stunt Russia's diversification away from oil and gas, which is good for its long-term stability.

As for Russia’s WTO application, the EU is keen on getting Russia to respect international trade rules and submit to the WTO dispute settlement procedures while Moscow seems in no rush to finish the accession negotiations. Russia’s membership is in any case a long way off, because of Moscow’s erratic trade policy, the US’ refusal to repeal the Jackson-Vanik amendment and vetoes from Georgia and, possibly, Ukraine (both WTO members). The EU should not use the WTO to make a political point at a time when the organisation is already weakened by the break-down of the Doha trade talks.

Nor would it be a good idea to ban Russians from visiting or working in EU countries. If Russians cannot travel, they may be more prone to believing their government’s propaganda about a West that is hostile and hypocritical. And the EU needs to think very carefully about targeted visa sanctions. A ban on Russian leaders and top officials would signal a new world in which the Europeans no longer believe that engagement can achieve anything. We are a long way from there. The EU could make it harder for Russia’s big businessmen to holiday at the Cote d’Azur or do business in London, hoping that they would put pressure on their leaders to change their ways. But many rich Russians have acquired foreign passports and few will risk falling out with a regime that seems to enjoy a bit of oligarch bashing from time to time.

The EU’s decision to continue doing business with Russia does not mean that it will be business as usual. The EU could stop preparations for a trade agreement for nuclear fuels, something that Russia wants badly to grab a bigger share of the European market. The same applies for Russia’s participation in EU research projects.

More fundamentally, the EU’s response should not start by asking how to punish Russia or change its course. It should start within the EU, with a set of well-defined objectives. The tricky part is to figure out how to achieve these objectives in the face of Russian opposition or obstruction. After Georgia, the EU can no longer pretend that its goals do not clash with Russia’s. That is good because it forces the Europeans to have a more open and realistic debate about its ties with Russia and to set clearer priorities (a slimming down the bloated EU-Russia agenda in reaction to Georgia would help with this). The EU’s priorities should be: stability beyond the EU’s eastern borders, energy security, and international tasks that require some sort of Russian involvement, such a preventing Iran from building a nuclear bomb. Russia would have to take the Union a lot more seriously if it beefed up its neighbourhood policy, made some tangible progress towards a common energy policy and streamlined its foreign policy-making.

Katinka Barysch is deputy director at the Centre for European Reform.