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People look at the flowers left in remembrance for the victims of the MH17 plane crash at Schiphol Airport, near Amsterdam, on July 21.

Tensions between Russia and the West over the downing of a Malaysian Airlines plane may have receded slightly Monday. But President Vladimir Putin is still facing a fresh wave of economic sanctions. Tuesday, European Foreign Ministers meet to consider tough new action to pressure the Russians into helping end the fighting in eastern Ukraine. These would follow last week’s additional U.S. measures.

The Europeans have bickered for months over stepping up sanctions against the Kremlin. Countries like Britain want to hit the Russians hard, but the Germans and Italians – who are heavily dependent on Russian energy – are afraid of antagonizing President Putin. The French are in the process of supplying two warships to Moscow and don't want to rock the boat.

However, Britain’s Foreign Secretary, Phillip Hammond, says the downing of flight MH17 changes everything, uniting the Europeans.

“What we need to do now is use the sense of shock, the sense of outrage to galvanize opinion behind a more robust stance. We have tools in our tool box,” says Hammond.

The UK wants to follow the U.S.'s example and slap Putin’s inner circle of oligarchs with visa bans and asset freezes, even though that could harm London’s financial sector. Nina Shick of the Open Europe think tank says Europeans could also use their leverage as Russia’s biggest trading partner.

“They could target European exports to Russia, which Russia is dependent on," she says. “We’re talking about things like machinery and medicine. These are things that Russia depends on, things that Russia won’t be able to source easily from other places."

Russia could retaliate by turning off the oil and natural gas that supplies 30 percent of Europe’s energy needs. But that would spark an all out economic conflict which – some analysts claim – Europe would win.

“Any economic war would be compounded five-fold on Russia compared to that of the EU. If it were to genuinely get serious, then the effects on Russia would be such that I think President Putin is actually a very worried man right now,” says James Nixey of the Chatham House Institute.

But as they prepare for their meeting on Tuesday, some European foreign ministers are also very worried. They feel they have to punish Putin but without driving up their own energy costs and tipping their fragile economies back into recession.

About the author

Stephen Beard is the European bureau chief and provides daily coverage of Europe’s business and economic developments for the entire Marketplace portfolio.

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