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West considers penalty against Putin

Russian President Vladimir Putin talks to young soccer players during a visit to Spartak's stadium Otkritye Arena in Moscow, August 27, 2014.  It will host matches of the 2018 World Cup finals.
Sergei Karpukhin | Reuters
Russian President Vladimir Putin talks to young soccer players during a visit to Spartak's stadium Otkritye Arena in Moscow, August 27, 2014. It will host matches of the 2018 World Cup finals.

Could boycotting the 2018 World Cup be more effective at persuading Russian president Vladimir Putin than an increasingly long list of economic sanctions? For the first time since the Ukraine crisis began nine months ago, EU diplomats are actively considering the idea.

According to an options paper circulated in European capitals on Tuesday, the EU is considering whether to recommend suspending Russia from "high-profile international cultural, economic or sporting events" including Formula One races, European football competitions and the next World Cup, awarded to Russia in 2010.

Diplomats said a boycott of the World Cup would not be among the new sanctions to be agreed by the end of the week. But during a meeting of EU ambassadors on Monday, several delegations—particularly Estonia and Lithuania—showed great enthusiasm for the idea, and the options paper suggests once new sanctions are decided, "thought could also be given to taking co-ordinated action" on a sporting ban.

"This kind of discussion is timely, as we do not see good will from Russian side," said a Latvian diplomat, who said the debate so far had been "conceptual".

After the 1979 Soviet invasion of Afghanistan, the US led a boycott of the 1980 Olympic Games in Moscow, setting a precedent for using international sporting events as a proxy for geopolitical brinkmanship. Four years later, the Soviets retaliated, leading an Eastern bloc boycott of the 1984 Games in Los Angeles.

Read MoreEU expected to decide new Russian sanctions: Report

"Boycotting a prestigious international sports event has a distinctively Cold War feel to it," said Mujtaba Rahman, head of European analysis at the Eurasia Group risk consultancy. "This will sting the Russians far more than anything the EU will do on finance this round."

The recommended economic sanctions, to be debated by the European Commission on Wednesday before being sent to national capitals for approval by the end of the week, will broaden EU measures approved in July. Most significantly, they would expand the ban on Russian companies accessing European capital markets, currently limited to Russia's large state-owned banks, to the country's defence and government-owned energy groups.

Under the proposal, all Russian defence and state-controlled oil companies would be barred from raising funds in European markets. Diplomats said the ban would hit Rosneft, Russia's largest oil producer which is 20 per cent owned by BP, and Gazprom Neft, the oil arm of Russian gas giant Gazprom.

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Russia would also be denied use of European oil services companies for conducting deep-sea drilling, Arctic exploration and shale oil production. Companies that could be affected include France's Technip, Italy's Saipem and Britain's Petrofac. The sanctions would not touch the sensitive gas sector, however.

Russia's largest banks are already covered by a similar financing ban, though the new proposals would prevent Russian state-owned lenders from using any financial instrument with maturity of longer than 30 days, less than the 90 days stipulated in July's sanctions. Russia's targeted banks would also be banned from raising funds through European syndicated loans.

The EU would also extend the blacklist of banned "dual-use" technologies—products that have both civilian and military purposes—to include more general machinery and computers that the military could use.

Read MoreUkraine: The struggle between hard and soft power

Football's world governing body Fifa has already come out against moving the 2018 World Cup, arguing shortly after the shooting down of Malaysia Airlines flight MH17 that "boycotting sport events . . . are not the most effective ways to solve problems."

—By Peter Spiegel and Christian Oliver of The Financial Times

Contact World Economy

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