Javier Beasoain de Paulorena, a Spanish hotelier in Bilbao, is ideally positioned to shed light on why the EU's fresh round of sanctions against Russia has more bark than bite.
There’s nothing fancy about Pension Zubia; it's a simple, 18-room, one-star hotel on Spain's northern Atlantic coast. But on a recent day, he’s in the process of adding a new Russian homepage to the hotel’s website, via a Russian flag icon soon to appear next to the British flag indicating English.
“It’s a huge market,” says Mr. Beasoain de Paulorena of the Russian tourism that is beginning to flourish here. “We lose nothing by trying.”
But he could lose the tourists who have started to arrive at his hotel – including 10 older women who recently stayed for an entire week – for geopolitical reasons beyond his reach.
While Ukraine remains riven by East-West tensions, a state underscored by pro-Russian separatists' referendums on independence Sunday, and the US and EU hit Russia with further sanctions over its annexation of Crimea, the EU remains reluctant to go as far as the US has in blacklisting Russians. The reason: Europe's nations vary greatly in how much they stand to lose via sanctions, depending on how close they are to Russia and how much they depend on Russian energy or its giant market for luxury goods, real estate properties, or tourism.
In Spain, Russian tourists have become increasingly important to the recovery of the economy, which collapsed as the housing market collapsed. Russians have been top investors of the vacant properties along the Spanish coastline. A report in March by Spain’s Society of Property Registrars shows that Russians are the third-largest buyers of property among foreigners in Spain. Only British and French buyers rank ahead of them. And according to Spanish tourism figures, the number of Russian tourists in Spain grew by 31.6 percent between 2012 and 2013, the largest rise of any nationality.
“Spain has been very reluctant to get involved" in this crisis, says Gayle Allard, an economist at IE Business School in Madrid. There are many reasons, including its own troubles with regional separatism. But she suspects the response is guided by economics that can be summed up as: “I have enough problems of my own, don’t bother me,” she says.
EU foreign ministers announced new sanctions today against Russia, adding 13 new individuals to the 48 already sanctioned, and for the first time, adding two businesses to its list of targets. Still, the bloc did not go as far as the US, which has to date targeted the inner circle of Putin and 17 companies.
The EU is limited by legalities and the need to find consensus among its 28 members, whose attitudes toward Russia vary. “The closer to Russia you are, the more negative the position you have,” says Paul Ivan, an analyst for the European Policy Centre and an expert on EU sanctions.
“If you are from southern Europe, you haven’t really interacted very much with Russia, with losing territories or having your countries invaded," he says. "At the same time, those countries have been going through economic troubles, they are not interested in losing business with Russia.”
Bilbao, a former industrial city, began to focus on tourism only 15 years ago, with the inauguration of the Guggenheim Museum on its Nervion River. It started reaching out to Russians four years ago, says Bilbao tourism director Mercedes Gonzalez, as part of a push to attract the emerging economies of the BRICS – Brazil, Russia, India, and China. Russia is especially appealing because of its proximity, she says.
The office began visiting Moscow’s tourism fair in 2010. “There is a huge potential; they are becoming a nation of travelers,” she says, one that the city recognizes. Like the owner of Pension Zubia, those who have country homes for vacation rental have also been translating their pamphlets into Russian.
While Russians have long visited the Mediterranean coast of Spain, they are now exploring other parts of Spain, like Bilbao, on second trips to the country, Ms. Gonzalez says. It’s so new the office doesn't know how many Russians actually visit – the local statistics office lumps Russians into the “other” category. But Gonzalez says she does know that as domestic tourism to the city has declined with the economic crisis, it’s been offset by a rise in international visitors.
Now the political crisis over Ukraine is likely to have a negative impact. Already the EU suspended talks with Russia over ending visa requirements, and economic uncertainty in Russia, in part caused by conflict over Ukraine, will impact the numbers of tourists willing to invest in trips and properties abroad.
Spain is not alone in fearing a loss of the Russian ruble. Greece has also depended on Russian tourists, who tend to spend more money and stay longer than average visitors. In Italy, they are significant purchasers of luxury goods.
And southern Europe isn’t alone in its ambivalence.
German Chancellor Angela Merkel, for example, had tough words for the Russian leader – she and French President François Hollande over the weekend promised to issue tougher sanctions if Ukraine’s scheduled presidential elections for May 25 are obstructed. But she faces a deep split in German society over how to proceed.
Over the weekend, former German Chancellor Gerhard Schröder urged the West to stop focusing on sanctions as a way out of the crisis. The German business lobby has argued on similar lines. Mr. Schröder is currently the chairman of Nord Stream, the company that operates the Baltic Sea gas pipeline from Russia to Germany; Russian state gas company Gazprom is the majority shareholder of Nord Stream.
But in Germany the appeal goes beyond economics, too. "We Germans are responsible for the deaths of 25 million from the Soviet Union during World War II. The reconciliation with Russia is pretty miraculous,” Schröder said. “Russians like Germans. It fascinates me that could happen after the horrors of the war. That's something of such great value that we can't be allowed to just squander it."