* Germany makes up third of EU exports to Russia, worth 36
* British Virgin Islands, Cyprus benefit from Russia money
By Robin Emmott
BRUSSELS, July 23 Germany and Italy have most to
lose if the European Union makes good on its threat to impose
harsher sanctions on Moscow, while Britain's overseas
territories are soaking up the lion's share of capital streaming
out of Russia.
The picture emerging from United Nations and European Union
data shows the impact of restricting trade with Russia would be
far from even, with Germany dwarfing others' exposure and those
urging sanctions loudest, such as Sweden, having less at stake.
That makes an EU plan to consider limiting Russian access to
European defence and energy technology more difficult, despite
pressure from the United States after the downing of a Malaysian
airliner over the conflict zone in eastern Ukraine.
Wary of antagonising its main gas supplier, the EU has used
travel bans and asset freezes so far in reaction to Russia's
annexation of Crimea and support for separatists in Ukraine.
Ministers agreed on Tuesday those measures may be widened if
Moscow does not cooperate with an investigation into the plane
crash and fails to stop weapons flowing into the country.
Limiting trade would be damaging because the 28-nation EU
sold goods worth 120 billion euros ($161 billion) to Russia last
year, even if that was only 7 percent of the bloc's annual
exports, according to the EU statistics office Eurostat.
Germany, Europe's biggest economy, accounted for one-third
of sales to Russia, around 36 billion euros. Many of those goods
could be restricted by sanctions: manufactured products
including those used in defence and energy.
EU governments are split over tougher sanctions, largely
depending on the closeness of their ties with Russia. Germany is
the swing state given its position at the heart of Europe and as
its weight as the EU's most populous country.
Britain, Poland and Sweden lead a group pushing for economic
sanctions, and whose combined total exports to Russia are less
than the size of those of Germany.
Some 6,200 German firms are active in Russia with 20 billion
euros ($27 billion) of investments there, while around 300,000
German jobs are dependent on trade with Russia, according to
Germany's Committee on Eastern European Economic Relations.
"More sanctions increase the price all of us have to pay for
this conflict," Eckhard Cordes, its chairman, told Reuters.
HeidelbergCement, which does business in Russia,
echoed that sentiment and a spokesman for the company said that
while it would accept sanctions, "economically there will only
be losers because both sides will suffer damages."
While the Baltic countries still do almost half their trade
with Russia, they are eager to diversify away from Moscow,
underlined by their decision to join the euro zone.
THE $94 BLN MONEY TRAIL
Italy is among the states most strongly resisting tougher
restrictions on Russia, along with Greece and Cyprus.
Italian exports to Russia were second only to Germany's last
year at nearly 11 billion euros, double those of Britain and
larger than the 8 billion euros of the Netherlands, which has
shifted to the pro-sanctions camp after 193 of its citizens were
killed in the plane disaster.
The Netherlands, a nation of 15 million, has an outsized
share of imports from Moscow and foreign direct investment flows
to Russia because of its position as an oil and commodities
trading hub and a tax-efficient base for offshore corporations.
Much of the Italian sales were manufactured goods, transport
machinery and chemicals -- the kind of sophisticated products
Russia's raw materials-dominated economy needs.
"Sanctions are always a problem both for those who are
subjected to them and those who impose them," Italian Economy
Minister Pier Carlo Padoan told reporters in Brussels.
Italy's allies include southern European countries such as
Cyprus, which stands to lose from sanctions because of the
billions of euros Russian oligarchs have invested there.
Of $94 billion in outward foreign direct investment by
Russian residents in 2013, $11 billion ended up in Cyprus,
according to U.N. and World Trade Organisation data.
Cyprus, where light regulation and cultural ties through
Orthodox Christianity have long attracted the capital and
savings of Russians, was only second to the British Virgin
Islands, which took in $61.7 billion last year.
Wealthy Russians took a hit when the euro zone imposed
losses on big bank depositors in return for a 10 billion euro
bailout of Cyprus last year after a banking meltdown.
($1 = 0.7424 Euros)
(Additional reporting by Francesco Guarascio, Adrian Croft and
Philip Blenkinsop in Brussels, Gernot Heller in Berlin and Tom
Miles in Geneva)