Government dispute over Ukrainian crisis: economic pragmatism winning out over sanctions

Ukrainian recruits in Kiev, March 4, 2014, photo: CTK

Widespread international condemnation of Russia’s intrusion into Ukraine has been replaced by controversy over how the democratic world should respond to the military occupation of Crimea. While the US is pushing for tough punitive measures against Moscow, EU foreign ministers are divided over the question of sanctions, and a similar dispute has now appeared in the Czech government.

Ukrainian recruits in Kiev,  March 4,  2014,  photo: CTK
The Czech government has been vocal in its condemnation of President Putin’s aggressive policy in Ukraine saying it was prepared to back a strong signal from the EU that such actions would not pass without consequences. But like ministers in Brussels, government officials in Prague are now at loggerheads over what those consequences should be and whether economic sanctions would not backfire by hurting Europe more than they would Russia.

While Foreign Minister Lubomír Zaorálek is defending the notion of diplomatic sanctions and mediation in order to give President Putin the opportunity to back down without losing face, two Czech cabinet ministers have expressed the view that Russia should be excluded from the multi-billion crown tender for the planned expansion of the Temelín nuclear power plant. Defence Minister Martin Stropnický and Jiří Dienstbier, who is in charge of the government’s human rights portfolio, argue that Russia’s use of military force in Ukraine is a flagrant violation of international law and the Czech Republic should be cautious about forging strategic ties with a country which clearly has no respect for democratic principles.

Bohuslav Sobotka,  photo: Filip Jandourek
The proposal was quickly shot down by Prime Minister Bohuslav Sobotka who said the government was not in a position to interfere with the Temelín tender, which was governed by given rules and regulations. He moreover warned against the policy of burning bridges, saying the Czech Republic was not going to halt all economic ties with one of its biggest trade partners.

“I do not approve of the Czech Republic taking any unilateral, isolated steps in this respect. We are not recalling our ambassador from Moscow and we will continue to support a diplomatic, peaceful solution to this crisis in close coordination with our EU partners. Economic sanctions would hurt primarily the people of Ukraine and also Europe’s own business interests. The Czech government is aware that Czech firms have business interests in Ukraine and in Russia and it will act in a prudent manner so as not to threaten Czech exports to the region. “

The Czech prime minister said the country wanted to coordinate its policy closely with the other three Višegrad group states - Hungary, Poland and Slovakia, and he will be travelling to Poland on Wednesday where the Ukraine crisis is expected to be high on the agenda of the talks. However despite the intensive consultations none of the Višegrad group states are likely to put their business ties with Russia at risk, since like most EU countries they obtain their gas and oil supplies from Russia and are unlikely to approve measures which could jeopardize their economic recovery from a drawn-out crisis.

Consequently, unless the situation should dramatically worsen, the Czech Republic and the other Višegrad group states are likely to take a fairly moderate stand at Thursday’s meeting of EU leaders in Brussels – possibly supporting a suspension of talks on visa-free travel with Russia and advocating diplomatic rather than economic pressure on Moscow.

Temelín nuclear power plant,  photo: Filip Jandourek
Despite the Czech prime minister’s reluctance to consider economic sanctions, the crisis in Ukraine is already making itself felt. The Czech Export Bank has announced it will not be financing new projects in Ukraine until further notice and the car maker Škoda has announced it is scaling down production in the country. Czechs are also bracing for a hike in fuel prices, with the price of petrol expected to rise by up to one crown within the next fortnight.