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Abe, Merkel stand firm on sanctions

Leaders try to admonish Moscow while protecting business interests

Reuters, Kyodo

Germany’s Angela Merkel and Prime Minister Shinzo Abe said Wednesday that the leading industrial powers would stand united on further sanctions against Russia if needed, despite Moscow’s threat to retaliate against foreign energy companies.

Both are struggling to strike a balance between admonishing Moscow for annexing Ukraine’s Crimean Peninsula and failing to control pro-Russian separatists in eastern Ukraine, and looking after their countries’ business interests and energy supplies.

The European Union, Japan and the United States have placed visa bans and asset freezes on dozens of individuals, some close to Russian President Vladimir Putin, but have held back on wider trade sanctions despite an escalation of the crisis in Ukraine.

On Ukraine, Abe said that he and Merkel agreed that they would not tolerate any alterations to the status quo by force, after Russia’s intervention in the country and annexation of Crimea. He added that Japan and Germany will seek a peaceful solution to the crisis in cooperation with other countries.

Russia must play roles as a “responsible player in the international community,” Abe said at a joint press conference after the summit in Berlin.

Abe told Merkel that Japan is ready to extend €800,000 ($1.1 million) in aid to help stabilize Ukraine, including funds to ensure a fair and transparent presidential election in May, according to Japanese officials.

Merkel said that if separatists holding observers from the Organization for Security and Cooperation in Europe in eastern Ukraine do not free them, and Russia does not use its influence to secure their release, “then we should not shy away from the need for further sanctions.”

“We have always managed to agree on G-7 declarations so far and I see no reason why further steps should not be unanimous,” she said after talks with Abe in Berlin, the first stop of his weeklong tour of Europe.

Following a new round of Western sanctions aimed at business leaders and firms close to Putin this week, the Russian leader said he saw no need for countersanctions but might reconsider foreign firms’ participation in areas such as Russian energy.

But Merkel said Europe, the United States and G-7 partners would stick to their joint response to Russia, adding: “We have thought through these measures and we have no reason to question our unity on sanctions or see it in another light.”

“Japan, Germany and the other G-7 countries will work together on what possible further measures need to be taken,” said Abe, though he said it was also “important to communicate with the Russian side.” This is a view shared with Merkel, who has the most influential contacts with Putin among Western leaders.

Both emphasized the importance of Ukraine carrying out free elections on May 25 to give people the democratic choice of who should succeed pro-Russian president Viktor Yanukovych, who fled Kiev in February amid bloody protests.

Abe said that Japan will send its officials to Ukraine as part of an international mission to observe the election.

On joint security cooperation, the two leaders agreed to enhance communications between relevant government offices on issues such as piracy off Somalia and the unrest in South Sudan.

They also plan to hold talks involving senior foreign and defense officials this year.

The planned dialogue will also cover the situation in East Asia, where North Korea has threatened stability with its nuclear and missile development, as well as means of controlling exports of defense equipment, at a time when Japan has relaxed its rules on arms exports.

Merkel offered encouragement for Japan’s long battle against deflation, but rejected the idea of Europe — where policymakers including European Central Bank chief Mario Draghi have played down talk of a similar threat — copying Japan’s aggressive deflation-busting stimulus policies, nicknamed “Abenomics.”

“We in Europe — and this is what the Bundesbank and others including the European Central Bank say — are not at immediate risk of deflation and our path of economic consolidation is the right one,” said Merkel, who responded to the eurozone crisis by prioritizing fiscal discipline over pro-growth policies.

“Japan’s situation is different and specific,” she said.

Abe, who has begun to reverse years of subpar growth with expansionary fiscal and monetary policies, told a business audience in Berlin earlier Wednesday that Japan was now “in the process of freeing itself from long-lasting deflation.”

His weeklong visit to Europe will also take in Britain, Portugal, Spain, France and Brussels, institutions such as NATO and the Organisation for Economic Cooperation and Development, and meetings with European business leaders.