Europe Fears Economic Hit If Russia Is Sanctioned Heavily

• Some big European powers expressing worry in talks with the U.S.
•  Comes as Russia continues troop buildup near the Ukraine border

Concern among some big European nations about economic fallout raises the risk of a split with the U.S. on how strongly to hit Russia with fresh sanctions if it invades Ukraine, according to people familiar with the matter.

Western allies are united in their desire to prevent a war as they enter high-stakes talks this week aimed at defusing tensions with Russia, warning it faces massive penalties for any incursion. Actions that have been discussed include export controls, curbing Russia’s access to technology, and even cutting it out of the global system for financial payments.

But while the major Western European members of the European Union remain committed in principle to a significant response, some have also aired worries with the U.S. about the potential for damage to their own economies, the people said. The group is still working through economic and legal assessments of the potential sanctions, they said.

European nations also fret that Russia would likely retaliate, possibly even cutting crucial gas supplies to a continent already grappling with record high energy prices. The bulk of any EU-wide response would also have to be unanimously agreed by all 27 member states, a group with differing views on Russia in general.

The U.S. has been consulting with various European nations ahead of the Russia talks, including what is known as the Quint grouping in the North Atlantic Treaty Organization, which involves France, Germany, the U.K. and Italy. It has also held talks with Eastern European states.

Translating well-coordinated words into a joint agreement on some of the specific measures being explored could prove tricky, the people said. The differences underline the challenge the U.S. and its allies face as they try to pressure President Vladimir Putin into reversing his massive troop buildup near the Ukraine border.

The countries have discussed options including cutting Russia out of Swift, the international payments system, limiting Russian banks’ ability to convert currencies and imposing export controls on advanced technologies used in aviation, semiconductors and other components, as well as computers and other consumer goods in more extreme scenarios.

The curbs could hit everything from aircraft avionics and machine tools to smartphones, games consoles, tablets and televisions, another person familiar with the discussions said. Under some actions, Russia could face export controls as stringent as those for Cuba, Iran, North Korea and Syria, which have been largely cut off from global trade and financing, according to the person.

One former official with ties to the current U.S. administration said a point of concern is how much Germany, which has just completed the Nord Stream 2 gas pipeline from Russia, would be on board. The recent departure of Angela Merkel as German chancellor after 16 years has also left a gap in terms of a European leader who can both navigate the EU into an agreement and engage directly with Putin, the person said. The Nord Stream 2 pipeline has not started pumping gas and is still awaiting regulatory approvals from Berlin and Brussels.