Sanctions duel: whose lunge will be the last?

Spring 2014 was the starting point of the sanctions swordplay. The European Union did the first „hit“. The first package of western sanctions against Russia was issued on March 17th. The European Union, the United States and Canada refused the access to their territory to a group of Russian citizens and froze their foreign bank accounts. The tensions between Russia and Ukraine triggered this decision.

It is important to know that the Autonomous Republic of Crimea and Sevastopol, which were earlier part of Ukraine, didn’t support the revolution which happened on the territory of the state. 96,77% of the population of the Crimea voted in march 2014 on the referendum for connecting to the Russian Federation. Russia recognized the referendum in the Crimea and granted a request for accession of the peninsula to Russia. The international community didn’t accept this decision. This led to the introduction of sanctions by the European Union against certain Russian citizens.

The initial list of people subject to individual sanctions of the EU was approved by the Council Regulation EU No. 269 / 2014 . Some days later the first Russian banks suffered from the sanctions. In the following months the „hits“ were only one-sided. The European Union regularly expanded the lists of persons and companies which were imposed by the sanctions. Additional to personal sanctions sectoral sanctions against Russia were introduced in July and August . They provided restriction of access to the financial markets, a ban on long-term financing, embargo on the sale of weapons and goods of a dual purpose.

Russia parried in August 2014. On the 6th of August the President of Russia signed „The decree on application of separate special economic measures for safety“ . It included a ban on import of a row of goods from the countries, which imposed sanctions against the Russian Federation. The list consisted of five groups of goods: meat and sausage, seafood, vegetables, fruits, dairy products.

Who was the winner of this „duel“? It is hard to say. But after a year we can sum up the first results. For example we will consider the influence of the sanctions and the countersanctions on the goods turnover between Russia and Europe. According to the Federal Customs Service in 2013, export of the EUs food to Russia made up 13,4% of the entire Russian import. The share of imported meat in Russia was for example 24%. The import of milk was estimated at 25%, cheese reached up to 50%. Moreover Russia was the largest buyer of vegetables and fruits from the countries of the European Union. The embargo struck on Russian buyers strongly. Habitual goods of the European production disappeared from the shops and the prices on those products that still were delivered rose.

The European Union experienced a significant damage. For example, German farmers lost around 600 million € in 2014 because of Russia’s response to the EU sanctions. And the price of specific agricultural products in the European Union countries fell dramatically. The president of the German Farmers Union Joachim Rukwied stated this fact out in his interview to Germany’s international broadcaster Deutsche Welle.

The ban on deliveries of agricultural and other products to Russia struck strongly on the Danish producers of agricultural products as well. In December 2014 the Danish Agriculture & Food Council reported that the Danish fisheries lost more than 35.4 million $ in total and the dairy farmers about 60-70 million $. In total, the exports decreased by 1.3 billion dollars. The damage from the Russian embargo caused a loss of (mainly producers of pork and pears suffered) at least 165 million Euros to Belgian agricultural producers, mainly producers of pork and pears. France lost about 453 million.

On February 9th, the Minister of Foreign Affairs of Spain, José Manuel Garcia-Margalio reported that the European Union already lost 21 billion euros due to the own sanctions and countersanctions. It is obvious that the Foreign Ministers of the EU were aware of these numbers. Nevertheless they prolonged the sanctions against Russia for half a year in February. A few days ago it was declared that the European Union decided to strengthen sanctions against Russia. This is noted in the draft resolution approved by Committee of European Parliament on foreign affairs . The Document will be submitted for vote in June. From the economical point of view the agreement will increase the losses of the European farmers, manufacturers and all related industries that already have suffered. And perhaps it will add new losses. Because nobody can predict how Russia will parry this „hit“.

By Lada Osornina

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