Three years of sanctions against Russia. Now what?

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Three years of sanctions against Russia. Now what?

Written by Borislav Boev; Originally appeared at A-specto; Submited in English to SouthFront via author

It’s been three years since the beginning of the EU sanctions against Russia. There’s been a great controversy whether these sanctions work or not. If we want to understand EU’s sanction policy, first we must deeply analyze its intentions and results.

For the last 20 years the European Union uses its sanction policy as an instrument for international pressure against particular government. Contradictory or not these sanctions almost always have been syndicated with the US sanction policy. The main questions about the sanctions and their effectiveness are

  • Do they achieve their strategic goal?
  • Do they support (any) political opposition in the particular country and if so, why?
  • What would be the long-term consequences for the population of the sanctioned country?

So, have the sanctions against Russia achieved their strategic goal?

The pretext for implementing sanctions was Russia’s behavior in Ukraine and the conclusions made by some Western countries on that basis. From geopolitical standpoint EU was looking on Ukraine as a new marketplace, but Europe failed to realize that at this time Ukrainian economy wasn’t ready for integration with EU at all.

Sanctions targeting Russia undoubtedly had some negative economic effect on the Russian economy, especially in 2014 and 2015. Although it’s still hard to say what’s the exact damage, European leaders believe that sanctions brought down the Russian GDP with 1 percent between 2014 and 2015.

Economic sanctions, no matter what, always have negative effect on both sides. EU sanctions against Russia make no exception. Apart from the negative consequences for the Russian economy, sanctions had hit European economy as well. Pre-sanctions trade between EU and Russia in 2013 was amounted to be 326 billion of euro, but from 2014 there was a steady decline. Bilateral trade dropped to 285 bln. euro in 2014, and 2015 was even worse – not more than 80-100 bln. euro. This decline had considerably worse effect on EU’s economy compared to the outcome of the Iranian sanctions for example.

We can clearly see that the Russian leadership was ready to meet the negative impact and pay the economic price, because there was big bet – Russia had to restore its forgotten international prestige. Sanctions were the only weapon in EU’s economic and political arsenal that could be used against Russia at that time. Since the very beginning was clear that nor NATO or the US would ever use military force against Russia – that would bring catastrophic consequences for the whole region. Some countries from Eastern Europe like Poland, Latvia, Lithuania and Estonia, known for their antirussian rhetoric, had rushed and implemented economic sanctions against Russia, hoping they will isolate and drown the Russian economy in no time. Other countries like Hungary and Italy were skeptical about the sanctions and their implementation, but silently supported them.

We must not forget that the big loser from this geopolitical standoff is Ukraine. In March 2016 Jean Claude Junker said that Ukraine probably wouldn’t join EU in the next 20-25 years.

Ukraine has lost from its own revolution. On one hand Ukrainian establishment achieved success in breaking the economic ties with Russia (which was Ukraine’s main trade partner for decades) and from the other – Ukraine was left alone by its EU partners.

In April 2016 The Netherlands rejected the famous proposal of trade deal with Ukraine and brought Kiev’s ambitions for closer cooperation with EU to an end.

Negative consequences for the Russian economy

Undoubtedly there has been a negative effect on the Russian economy, although these maybe fall to the ‘collateral damage’ category. The EU sanctions were the main reason of Russian financial crisis at the end of 2014. EU always knew that financial liquidity has been always a problem for Russia and the sanctions fired at that direction. The sanctions had hit Russia’s financial system and private sector, and the latter applied pressure to the government by asking for financial help. According to the World Bank, sanctions worsened Russia’s ability to trade and access the international markets and thus the rubble suffered. Problematic ruble lowered the interest from some foreign investors.

These EU sanctions have been helped by the low oil prices in 2014. All these chicken have come to a roost and by the end of 2014 the rubble was collapsing. Russian Central Bank had to intervene to stabilize the course.

The boomerang effect on EU and how the Union suffered from its own sanctions

The sanctions against Russia had a big impact on the European economy. The outcome for Europe was much worse compared to the US, as the latter initiated sanctions as well. In 2013 trade with Germany, which is the most powerful economy in EU, amounts to 77 bln. euros. In 2014, only one year after implementing sanctions against Russia, bilateral trade registered significant drop by 13% or 285 bln. euros (compared to 326 bln. for 2013).

The negative impact arises from the fact that the exports of goods decrease equally with imports, which is very bad for the European economy. Big trade partners like France, Germany, Netherlands and Poland were hit hard by these sanctions – they lost more than 10 billion of euro in 2015.

Contrary to that, direct foreign investments between Germany and Russia are showing some signs of increase. According to the Russian fund for direct investments, Germany is the second largest investor in Russia (The first one is China). Russian ministry of economy says that German firms have invested more than 2 billion of euro in the country as of 2016.

If two main trade partners, which undoubtedly are Russia and the EU, stop or restrict their bilateral trade, it’s 100% sure their economies would be harmed. Europe has suffered huge losses from these sanctions. The question is why EU thought it would bypass these negative effects?

There is some hope for the Russian economy itself. Liquidity assets have increased over the past year and as of March 1, 2017 are amounted to 397 bln. dollars – a positive sign of fiscal stability in the country.

Russia have met 2017 with optimism about its economy. GDP shrank by only 0,2% in 2016, compared to the drastic decline of 2,8% by 2015. That may be regarded as a positive sign. The stabilization of the Russian economy is largely due to the fact that agriculture, industry and mining are on the rise. Industrial production jumped by 3,2% in December 2016 compared to the same period in 2015.

The complete recovery of the Russian economy however passes through increasing the purchasing power of Russian citizens. If there is a crisis in demand, the positive trends in other sectors won’t be felt. If these positive trends however continue throughout the year and the oil prices remained stable, we can surely say that in 2016 Russia might be able to achieve growth in GDP of around 1,7%.

The worst years of sanctions were 2014 and 2015. They brought severe damage for the Russian economy. But Russia handled the sanctions relatively well and managed to recover. Earlier this year the President Putin said that Russians have gone through sanctions. There is a reason behind such optimism – there are positive trends in Russian economy.

On the other hand, The EU turns blind eye to the negative effect of its own sanctions. Many politics still believe in the mantra of solidarity, without considering the latest developments in both EU and Russia. We must understand that the world of 2017 is totally different from the world of 2014.

Despite negative effect on the Russian economy, the EU sanctions didn’t achieve their strategic goal. Crimea remains within the Russian Federation. Russia continues to fight terrorism in Syria.

Inside EU, the disagreement about the sanctions have weakened the political system in Europe. Italy and Hungary still show different view and EU should consider their opinion instead of making decisions of automatic renewal of the sanctions. The most affected European economies cannot continue to ‘wander between the sanctions’, because the negative impact is becoming a real issue.

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  • Solomon Krupacek

    I don´t think, it was so easy for russian economy. Sure the decrease was more then miserable 1% I am laisy to check it, but i know by herta, the GDP per capita decreased by round 3000 dollars and now russia is on the level of hungary, which is one poor country in central europe.

    also this: If two main trade partners, which undoubtedly are Russia and the EU,
    stop or restrict their bilateral trade, it’s 100% sure their economies
    would be harmed
    you should understand 1 thing. russia is 1 country, eu = 28 countries. i am sure, for none of them is russia the most important partner. so, these sanctions ment for member states of EU, that decreased the businiss with only 1 country. but for russia was worse, for it decreased with all countries. therefore was much harder for russia then for countries of EU.

    the russian economy strenght is on the level of italy. such medium economy cn run easily in problems. look, you can produce 10 sarmatas, the gdp will rise, but the people will not have better life. and exactly this happened. there are regions, wherte are problems with salaries, old-age pensions.

    i had no doubt, russia will overstay these sanctions, and i am satisfied, that there are good results in agricultural fields (after grains you shold focus on vegetables and fruit), putin ordered to build up new medical industry. but you should begin with electronics, car industry and spend massive money in the infrastructure and buildings.

    • John Brown

      Russia and China can print their own money no problem. Racist
      supremacist Jews and their DNA test for racial superiority have abused their money
      printing power with their private federal reserve in the USA, so it won’ last much longer, if Russia and China start to print their own money backed by their economies and gold. China had their own criminals scamming their country by money printing fraud as organized racist supremacist Jewry does today over 2,000 years ago. This is probably where Jews learned it from. It’s one of the main reasons for the fall of China and why China did not reach the level of technology we have today over 2,000 years ago. The Chinese
      know exactly how it works and what to do. They are making ready so they
      are sure their economy will be as independent of the Zionist global empire as
      possible when they pull the trigger on the Federal Reserve Zionist dollar and
      the Zionist empire.

      Racist supremacist Jews in their master race arrogance
      thought they could destroy the west and christiandome by shipping off all their
      jobs and industry to China. In doing this racist supremacist Jews have sown the
      seeds of their own destruction as Chinese are not slave donkeys as racist Jews
      think and Chinese are every bit as smart as the most racist supremacist master
      race as are all Goyim.

      As Abraham Lincoln (the most hated man in history by Jews for
      destroying the Jewish slave trade in the Americas) after the messiah Jesus Christ
      said, “the best way to defeat your enemies is to make them your friends” as all
      Goyim must do coming together to defeat racist supremacist satanic Jewry.

      • Solomon Krupacek

        i think, russia already has own money. other thig is, when want anipulate with it, who will accept and under which conditions? if this would be so easy, already happened. :) btw, china want juan become part of valuta basket. that means, will not manipulate withnothing.

        • John Brown

          No right now the Russian central bank is still controlled by
          the Rothschild’s etc. and they are contracting the money supply in Russia, this
          is why the Russian economy is shrinking (this is always why a modern economy shrinks / contracts) it’s
          not a donkey cart economy, it’s not o 800 BC, we are in 2017, with no currency
          / medium of exchange there can be no economic activity period, so to shrink
          economic activity you must contract the money / currency supply which is what the Rothchilds etc. when sanctions were introduced, the sanctions themselves don’t harm the Russian economy. Sanctions are the mask the distraction to disguise
          the money power. Countries like Russia, the USA, Canada, Australia etc. are self sufficient
          in everything they need for a modern economy (they have a competitive advantage)
          so they do not need to trade internationally, so sanctions in reality sanctions in them have no
          real economic affect accept perhaps in the very short term for a few months at
          most as markets, supply and demand adjust to be supplied domestically.

    • John Brown

      No right now the Russian central bank is still controlled by
      the Rothschild’s etc. and they are contracting n the money supply in Russia this
      is why the economy shrinking (this is always why a modern economy shrinks it’s
      not a donkey cart economy, it’s not o 800 BC, we are in 2017, with no currency
      medium of exchange there can be no economic activity period, so to shrink
      economic activity you must contract the money / currency supply) since sanctions,
      not the sanctions themselves. Sanctions are the mask the distraction to disguise
      the money power. Countries like Russia the USA, Canada, Australia are self sufficient
      in everything they need for a modern economy (they have a competitive advantage)
      so they do not need to trade internationally so sanctions in reality have no
      real economic affect accept perhaps in the very short term for a few months at
      most as markets, supply and demand adjust to be supplied domestically.

      • John Whitehot

        actually, the United States COULD be self sufficient, and it’s what the Trump economic program seem to be looking to achieve. Yet since the end of WW2 they’ve been steadily outsourcing every possible productive mean abroad. The only good news of the few latest years are related to having achieved a self-sufficiency in energetic products, although it’s very likely something related to high oil prices.

        • John Brown

          Most of international trade today is basically theft and
          fraud meant to rob all countries and the 99% by transferring wealth to the criminal elite 1% as proven by the Oxfam report, that a few billionaires now have more wealth then over half the planet as a result of so called free trade. If it were really free trade wealth concentration should be diminishing not increasing. It is also meant to take away nations sovereignty and independence so they can’t make anything on their own thereby eliminating democracy in democratic nations.

  • John Mason

    So how are the sanctions against Syria justified considering that it was the West and US that started the conflict. Like a murderer committing the crime then claiming innocence and demanding to be compensated. Sanctions unless having UN mandate are illegal and actually a declaration of war.

    • Bob

      There are absolutely no legitimate reasons for US economic sanctions on Syrian state. When accept that reality, it’s sort of a red pill moment for anyone in west. As are also accepting that US has, and is, engaged in highly aggressive wars on foreign sovereign states, and their civil populations, that it simply wants control of, either for geo-strategic or resource acquisition reasons.
      This wildly contradicts the soft power, media machine, onslaught we receive in west. Of the US as a benevolent force for good, and the constant drip fed narrative of US forces only being deployed against ‘evil’ and ‘threats’. In contrast, US forces are being deployed right now, illegally, across North East Syria in a bid to seize a sovereign country’s territory and redefine and reallocate its ownership. All under the manufactured pretext of fighting an evil terror group, that was of course facilitated and weaponized by the US in the first instance back in 2011.
      People in Pentagon actually get paid to go about this aggression and popular deception…

  • Eze Enwereuzor

    They’re a failure like the EU.

  • Spectrum

    Yes, Russia has suffered from sanctions, but I’m proud that I’m Russian.

  • John Marks

    EU should end the sanctions now and make friends with Russia.
    The EU should also reverse its mad policy of supporting jihadist nutjobs in Syria.

  • goingbrokes

    The economic sanctions against Russia is the US way to weaken both Russia and EU. That EU bureaucrats played ball is the astonishing fact. The European nations have in no way benefitted from these sanctions.
    Also, EU sanctions against Syria must be lifted, and their political recognition of the “opposition” as representing the legitimate aspirations of the Syrian people must be confined to the dustbin of history.

  • Jonathan Cohen

    Most American’s would cheer if Russia bombed Saudi Arabia like Trump promised. Fewer, but still many Americans would cheer Iran for doing so.