EU sanctions against Russia have negative impact on economic relations of both sides Analytic

23 September 2016. PenzaNews. The European Union once again prolonged the application of the restrictive measures against Russian and Ukrainian individuals and businesses. These sanctions consist of an asset freeze and a travel ban against 146 persons and 37 entities.

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“The assessment of the situation did not justify a change in the regime of sanctions nor in the list of persons and entities under restrictive measures,” says the statement published on the European Council’s website on Thursday, 15.

Moreover, economic sanctions targeting specific sectors of the Russian economy are currently in place until the end of January 2017; and restrictive measures in response to the illegal annexation of Crimea and Sevastopol, limited to the territory of Crimea and Sevastopol are in place until the end of June 2017.

Meanwhile, many experts and politicians believe that the sanctions do not bring the desired effect and cause significant damage to the business in both Russia and the West. According to some analysts, Moscow has already got used to the existing restrictive measures, which cannot isolate the country on the international arena.

Commenting on the situation, Arne Melchior, Senior Policy Fellow at the Norwegian Institute of International Affairs expressed regret about further extension of sanctions.

“It is unfortunate that sanctions had to be extended once more. I hope for a solution to the crisis so that trade and business can return to normal,” he told PenzaNews.

It is true that businesses are hurt by sanctions on both sides, he said.

“Norway is particularly hit by Russian sanctions since most of our exports to Russia were seafood. So exports have been strongly hurt, much more than Norway’s imports from Russia. There is also long-term damage to the Eurasian regions when Ukraine is ridden by conflict and crisis instead of reform and recovery. Russia is larger but it will create a deep economic loss in the long run if its neighborhood is drowned in conflict and poverty,” Arne Melchior explained.

According to him, solving the Ukrainian conflict is a key issue.

“Between Norway and Russia, cooperation continues in many other areas. We hope to return to a positive relationship in all areas. I think CIS countries except Russia could play a more active role for solving the conflicts,” he added.

Meanwhile, Arnaud Dubien, Director of the Observatoire Analytical Centre of the Franco-Russian Chamber of Commerce, reminded that the restrictive measures against individuals and organizations comply with the EU official position of non-recognition of the Crimea illegal annexation.

“These are not sectoral sanctions which negative impact on business is discussed a lot and which are opposed by many European countries. These sanctions do not cause any debates, [...] debates are only about the members of parliament who are on the list. They can be the first to be excluded from the list; that will demonstrate the move forward,” the expert said.

However, according to him, the situation obviously showed that both Russia’s and the West’s political ambitions have prevailed over economic expediency.

“The EU countries and especially Angela Merkel have sacrificed economic interests of their businesses in Russia. French business proved to be more resistant to non-market impact from the outside than German. The Russian government introduced food embargo that caused consumer inflation, which hurts millions of people. It is irrational, and both sides should think about the way-out from this dead end,” Arnaud Dubien said.

From his opinion, the situation can fundamentally change only after the change of leadership in a number of Western countries.

“I think that the present European leaders will not change their opinion about Russia and their actions towards it. They all have a deep-seated position. It is much personified and highly connected with the personality of Vladimir Putin. The future will largely depend on the outcome of the election race in the United States and European countries, including Germany and France,” said Director of the Observatoire Analytical Centre of the Franco-Russian Chamber of Commerce.

“One thing is clear: under any scenario, Russia will not be the first to make concessions in this situation. It is obvious that we should not expect to find the way out soon. Improvements are possible only as a result of new leaders’ strong decisions, or in the case of potential new catastrophes, which can still be avoided,” he added.

In turn, Oleg Prozorov, Director General, the Belgian-Luxembourg Chamber of Commerce in the Russian Federation, also pointed out the negative impact of restrictive measures on the development of business relations.

“Being the head of the Belgian-Luxembourg Chamber of Commerce in Russia and expressing the opinion of the majority of the business community, I regret that the restrictions continue fueling the economic crisis,” the expert said.

However, according to him, the work in this direction goes on, different opinions and situation in the economy are being explored.

“At every opportunity we voice the futility of the idea to isolate the country, the distance from the capital of which is closer to New York City than to its own Vladivostok. I am personally convinced of the need to take measures to normalize [relations], and lift sanctions as an instrument that contradicts the progress,” Oleg Prozorov said.

At the same time, he reminded that the EU consists of 28 countries and the decision requires consensus.

“I think it is difficult to recognize the fallacy of the measures that have been taken, and openly declare about it. But there is a historical necessity: we are a single civilization, and we are geographically, economically, culturally bound together. The differences must be overcome, and the sooner politicians reach a compromise, the freer the business will be,” said Director General of the Belgian-Luxembourg Chamber of Commerce in the Russia.

In turn, Andreas Metz, Head of Press and Communications Department at the Committee on Eastern European Economic Relations, reminded that so far, the EU extended the economic sanctions to the end of January 2017, and if there will be real progress in the Minsk peace process during the next months, there is a real chance that some of them will be reduced.

At the same time, he stressed that all decisions on sanctions may only be taken by democratically elected politicians, not businessmen.

“But it makes sense that politicians are listening carefully to the standpoint of business. The war in Ukraine and the conflict between the West and Russia is a lose-lose situation for everyone. Business always needs a peaceful, stable and open environment to flourish. We expect the politicians on both sides to find a way out of the sanctions and this dead-end situation and to guarantee a peaceful and save environment for people and business,” Andreas Metz explained.

In his opinion, mistakes were made on both sides, so both sides have to find a way out of the dead end situation.

“Russia has a strong position in the conflict zone in Eastern Ukraine; it can contribute more to the peace process. We hope for progress in the peace process until December. Currently there is a cease fire in Eastern Ukraine and there might be a summit in Berlin in the Normandy format in autumn. Hopefully we see elections in Eastern Ukraine by the end of this year. This is the precondition for the lifting of some economic sanctions,” the expert said.

In turn, William Courtney, former US Ambassador to Georgia and Kazakhstan, former member of the US National Security Council, an adjunct senior fellow at the RAND Corporation, expressed an opposite view, pointing to the absence of any conditions to change the situation.

“Russian aggression in eastern Ukraine has led the European Union and America to impose economic sanctions on Russia’s energy, finance, and defense industry sectors. This aggression persists. Sanctions will be removed after Russia withdraws from eastern Ukraine,” said a retired American diplomat, who has served as Senior Director for Russia, Ukraine and Eurasian affairs in the Bill Clinton administration.

Answering the question whether senior Western officials should listen to the business community who oppose oppressive economic sanctions, he pointed to the fact that US and European politicians protect all the interests of their states.

“Democratic governments in the European Union and America seek to protect all of their countries’ interests, including economic and political,” William Courtney said.

According to him, the political mood of the Europeans can only be changed with Russian withdrawal from eastern Ukraine.

“Moscow will eventually withdraw. Military intervention in eastern Ukraine has been a strategic blunder for Russia. Withdrawal will help improve its economy and international stature,” he said.

Meanwhile, Fernand Kartheiser, Luxembourg Parliament member for the Alternative Democratic Reform Party (ADR), called the restrictive measures impractical.

“I persist in thinking that the sanctions are not only useless and but also counterproductive. They harm the economy on both sides, in the West especially the agricultural sector,” the politician stated.

Moreover, according to him, the justification for the sanctions is not convincing.

“For instance, the enquiries into the MH17 case have, at least until now, not been able to prove any direct Russian responsibility in the downing of that plane, nevertheless the additional sanctions against Russia introduced as a consequence of that tragedy still remain in place,” Fernand Kartheiser explained.

“As much as the Minsk process is concerned, one has to realize that much of the work that the Ukraine has to do has not yet been done, nevertheless the sanctions against Russia remain unilaterally in place,” the deputy added.

In the present case the political approach towards Russia is simply wrong and business may indeed be more intelligent, he believes.

“I do support the development of economic relations with Russia. Even though the Russian democracy is not perfect, it proves to be stable and largely reliable. The West should support the democratic development in Russia instead of creating tensions where it is not necessary,” the politician stressed.

In his opinion, the mood in the EU suffers very much from the sanctions.

“More and more Western European Nations want to put an end to them, others, more to the East, demand even tougher sanctions. Since a decision has to be taken unanimously there is, at least for the time being, no way out except by a breach of the rules which will then even weaken more the European Union. In addition the leading role played by Berlin and Paris is not really welcome in many member States that do not easily accept the self-proclaimed leadership of Angela Merkel and Francois Hollande,” Fernand Kartheiser said.

A change of policy in Washington would of course be of paramount importance, he added.

“Europe is in a process of rapid destabilization. There are too many crises simultaneously: monetary crisis, public debt, illegal migration, institutional questions and Brexit, different approaches towards Turkey and towards Russia, loss of confidence within the EU, security challenges around Europe. In many countries new parties form and can obtain impressive electoral successes. The recipes that we had for the last 40 years will not be good enough to give Europe a new start. Time for fundamental change has come,” the politician concluded.