German industry lobby supports tougher sanctions on Russia

BERLIN, July 28 Mon Jul 28, 2014 3:27am EDT

BERLIN, July 28 (Reuters) - Germany's main business lobby on Monday backed tougher sanctions on Russia, saying such pressure may help solve the conflict in Ukraine, although it could damage both the German and European Union economies.

The EU has frozen assets and banned travel for some Russian officials, after Russia annexed Ukraine's Crimea region and began supporting separatists fighting Kiev's forces in eastern Ukraine.

Ulrich Grillo, the head of the Federation of German Industry (BDI) lobbying group, said more sanctions should not be ruled out. He spoke before EU policymakers meet on Tuesday to discuss whether to impose further sanctions.

"The BDI and I personally have become convinced that the behaviour of the Russian government in the Ukrainian conflict of secession must have noticeable consequences for Moscow," Grillo wrote in a guest contribution for Handelsblatt newspaper.

"As painful as further economic sanctions will be for European business development, for German exports and for individual companies, they cannot and must not be ruled out as a way to apply pressure on the Russian government."

Germany, Europe's biggest economy, sold about 36 billion euros of goods to Russia last year, almost a third of the EU's total. But its exports to Russia dropped by 14 percent in the first four months of this year and some business groups have warned that the decline endangers some 25,000 jobs in Germany.

On Sunday, German Finance Minister Wolfgang Schaeuble told a newspaper Germans must put peace before economic considerations and accept tougher sanctions against Russia if necessary.

Grillo acknowledged the effect of sanctions were arguable but said Russia's dependence on "raw-material exports and on access to international capital markets" could be pressure points.

"The sanctions agreed so far, which are quite manageable, have already shown initial effects on the German economy," Grillo said.

"Harsher sanctions will lead to significantly more noticeable consequences. The economic damage that will arise for Germany and the other EU countries will be more than cancelled out, however, if we succeed in enforcing international law in Europe and a legal framework in general." (Reporting by Annika Breidthardt; Editing by Larry King)