May 19, 2016 / 9:42 AM / in a year

EU seen on track to extend economic sanctions on Russia: sources

European Union Foreign Policy Chief Federica Mogherini speaks during the seventh U.S.–E.U. Energy Security Council in Washington, U.S., May 4, 2016. REUTERS/Joshua Roberts

BRUSSELS (Reuters) - The European Union is on track to renew economic sanctions on Russia over the crisis in Ukraine when they expire in July, though an extension could be contested and only short-term, diplomats and officials said.

The 28-strong EU needs unanimity to keep the sanctions in place and the bloc’s unity has been increasingly tested on that.

While some states stress the resurgent Russia has not delivered on commitments in the so-called Minsk peace process for east Ukraine, others want to restore trade ties with Moscow.

EU foreign policy chief Federica Mogherini told German newspaper Die Welt on Thursday she expected the energy, financial and defense sanctions to be renewed.

“EU heads of state or government had tied the lifting of the sanctions to a full implementation of the Minsk Agreements. So far, this has not been reached,” Mogherini said in an interview.

“There have always been different opinions on some elements of our sanction policy. It will probably stay that way...What is important is that we keep this unity and decide all together.”

The EU slapped sanctions on Russia after Moscow annexed Crimea from Ukraine in March 2014. It stepped them up later that year as the Kremlin backed rebels fighting Ukrainian troops in east Ukraine, where more than 9,000 people have been killed.

The EU says it will ease sanctions only upon Russia’s full implementation of the Minsk agreements, but progress on applying the peace accords - negotiated by Berlin and Paris - has stalled for months.

Moscow and Kiev blame each other for failing to stick to the deal, which includes organizing local elections in east Ukraine, restoring Kiev’s control over the whole border with Russia, and the withdrawal of heavy weaponry from the conflict zone.

Italy, Greece, Cyprus, Hungary and Bulgaria are among EU states skeptical that sanctions should be extended, diplomats say, facing off against Britain, Sweden, Poland and the Baltic states.

“I don’t see how we could not extend them in July. The conditions, including Minsk, are not met,” said one EU official.

Another official said the most likely scenario was a six-month extension, adding that G7 leaders would discuss the matter at their next summit in Japan on May 26-27 as the EU and the United States aim to keep a joint stance on Russia.

Last year, G7 leaders meeting in Germany vowed to keep sanctions in place until Russia fully implements the terms of the peace deal. Italian Prime Minister Matteo Renzi later briefly opposed extending the restrictive measures at the end of 2015, but eventually fell into line.

A RETHINK TOWARD YEAR-END

Sources said Renzi sounded more critical of Moscow and signaled no opposition to extending sanctions this time around at a meeting last month between the leaders of Britain, France, Germany and Italy with U.S. President Barack Obama.

“If Ukraine does its homework and Russia continues to be an obstacle, then an extension of the sanctions shouldn’t be a problem,” a senior German official said. “Renzi may not be the big hurdle in the sanctions debate that he has been.”

Opposition - but not a full-on veto - could come from Slovakia, Hungary and Greece, according to EU sources.

“They all want to say something loud to help their business relationships with Moscow. But I would not expect them to block an extension,” a senior EU official said.

However, even though the EU makes easing sanctions conditional on the full implementation of the Minsk accords, there are growing doubts about whether the troubled peace process has much of a future left.

While it helped to sharply decrease violence in east Ukraine, it has failed to resolve the conflict. The questions is what should follow if Minsk sponsors declare it dead.

In saying the EU policy would not change yet, Mogherini signaled a broader review of policy later this year: “In the second half of the year,” she told Die Welt, “EU governments should make a substantive political evaluation on the degree of implementation of the Minsk Agreement, and on how the way forward toward solving the conflict in Ukraine looks like.”

Other types of EU sanctions on Moscow, namely the restrictions on economic relations with Russia-annexed Crimea and travel blacklists on Russian officials and individuals, expire in late June and mid-September, respectively.

That means that even if the economic measures are renewed now, there are likely to be more heated discussions on the EU’s stance on Russia in the second half of the year.

“There may be some problems this time around but I expect no drama,” said another EU official. “The real drama we see coming in December.”

Reporting by Gabriela Baczynska and Alastair Macdonald in Brussels, Andreas Rinke and Noah Barkin in Berlin, Writing by Gabriela Baczynska, Editing by

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