* EU expands scope of sanctions to allow it to target firms
* But companies must be linked to annexation of Crimea
* Little appetite in EU for far-reaching measures
By Justyna Pawlak and Tom Körkemeier
BRUSSELS, May 8 European Union governments have
laid the groundwork for possible sanctions against Russian
companies, including energy giants, over Ukraine, but diplomats
say there is little appetite for now to impose any far-reaching
Senior EU diplomats reached a preliminary agreement late on
Wednesday to expand the legal criteria for imposing sanctions on
Russia, with the goal of making it easier to freeze the assets
of companies involved in the Ukraine crisis.
Decisions on which companies to target could come as soon as
Monday, but EU officials stressed the scope of new sanctions
would be limited to firms or entities, if any, that were linked
to Russia's annexation of the Ukrainian peninsula of Crimea.
"It is related to Crimea ... to what we have witnessed
there," a senior EU official told reporters.
The EU has so far imposed asset freezes and visa bans on 48
Russians and Ukrainians over Moscow's annexation of Crimea, but
the United States has taken tougher measures.
Pro-Russian separatists have taken over parts of eastern
Ukraine and plan to hold a referendum on Sunday on breaking away
from Kiev. Yet despite the turmoil, the EU is not yet prepared
to move to hard-hitting trade or financial sanctions on Russia,
of the kind its leaders threatened in March to impose if Moscow
took further steps to destabilise the situation.
With Western companies reporting trouble in their Russian
operations this week due to the Ukraine crisis, many EU
governments are reluctant to impose tough sanctions that could
lead to Russian retaliation and damage their own economies.
They are also wary of antagonizing a major supplier of
energy to the EU.
Nevertheless, another EU diplomat said the expansion in the
scope of the EU's sanctions was significant.
"It's an important line to cross. It is the EU being willing
to impact companies ... with wider economic repercussions. It is
not, however, wholesale economic sanctions against Russia," the
diplomat said, speaking on condition of anonymity.
Another EU diplomat said that, in theory, the bloc's 28
governments could use the new legal rules to freeze assets of
powerful energy firms such as Gazprom but only if it
could be proven it was involved in Crimea.
"Theoretically, it is possible that companies like Gazprom
are targeted," the diplomat said, speaking on condition of
anonymity. "At this stage it is unlikely that the EU puts
Gazprom on the sanctions list."
Specifically, the new rules establish that the EU could
target entities in Crimea "whose ownership has been transferred
contrary to Ukrainian law, or legal persons, entities or
bodies which have benefited from such a transfer", according to
a text quoted by EU diplomats.
Until now, EU rules only allowed the targeting of Russian
companies if they were clearly linked to an individual also
facing sanctions. That will change when EU foreign ministers
formally approve the new criteria on Monday.
"It could impact a lot of large Russian businesses if that's
the road the EU wanted to go down," one diplomat said.
But he added the ministers who are due to decide on new
sanctions targets may want to return to the subject in a few
weeks, and only pick a small number of people or companies on
The new criteria expand the scope of the EU's measures to
permit sanctions not only against those deemed responsible for
undermining Ukraine's territorial integrity, in line with
previous rules, but also against those who threaten the
EU governments are anxious to maintain clear legal rules on
sanctions because of a slew of legal challenges by Iranian and
Syrian officials and companies in recent years, which have
undermined sanctions on those countries.
(Additional reporting by Adrian Croft; Editing by Mark