April 14, 2024

(Bloomberg) — The European Union is gearing up for a fight over what should be included in its 12th package of sanctions over Russia’s war in Ukraine, as the Group of Seven moves ahead with a plan to ban purchases of diamonds from Moscow.

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The new measures, which could be presented as early as next month, would likely include the EU’s version of the upcoming G-7 ban and possibly a long-awaited proposal to use the profits generated by frozen central bank assets to aid Kyiv, according to people familiar with discussions.

A group of member states, including Poland and the Baltic nations, want to go even further, said the people who asked not to be named on a confidential issue. The group has called for additional sanctions on LNG and IT services among the measures they would like to see in a fresh proposal, said the people.

The group of countries has also urged restrictions on Russia’s nuclear sector. But those attempts have been resisted many times before, as too many member states are opposed. Some countries argue there is little left to sanction, amid calls to ensure existing restrictions are enforced.

Poland wants to strengthen sanctions on some commodities adopted in previous packages, according to a document seen by Bloomberg News. Its proposals include lowering import quotas for synthetic rubbers, making steel restrictions more effective and introducing a ban on solid caustic soda. Warsaw is also seeking a new sanctions package against Belarus.

Earlier attempts to sanction Russian gems in Europe have met resistance from leading importer nations like Belgium, which argued that a simple ban without a global deal would just shift the lucrative gem trade elsewhere. The G-7 mechanism aims to track gems across borders, as well as introducing a direct ban on purchases from Jan. 1, and an indirect ban which would kick in more gradually.

A spokesperson for the European Commission, the EU’s executive arm, did not immediately reply to a request for comment.

The new package could come during the first half of October, or be announced during an EU-US summit planned for next month, with no date set for the gathering yet.

Any new package is also likely to include further moves to crack down on Russia’s ability to get round the EU’s sanctions through third countries such as the United Arab Emirates and Turkey.

As part of the discussions the commission will put forward proposals in the coming weeks to introduce a windfall tax on the profits frozen Russian central bank assets are generating at clearing houses, despite opposition from the European Central Bank.

Commission President Ursula von der Leyen is likely to push for the windfall tax following an earlier pledge, but member states have expressed legal and financial stability concerns. With some €200 billion ($213 billion) in Russian central bank assets frozen, some European leaders have called for a portion of that to go to rebuilding Ukraine.

(Updates with document on Polish position in fifth paragraph)

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