Tuesday

24th Apr 2018

EU sanctions hurting Russian firms, US says

  • Moscow's Gum shopping centre. Sanctions have had some effect, but US study notes Russia is not on the verge of a “systemic” crisis. (Photo: Martha de Jong-Lantink)

EU and US economic sanctions are draining money from some Russian companies and from its state aid fund, according to US research.

The sanctions have, over the past two years, wiped out one third of the operating profit, half of the assets, and one third of the staff in some targeted Russian firms, a new study by the US state department said.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

  • Russian oil firms, such as Rosneft have no access to short-term credit or high-end technology (Photo: rosneft.com)

Russia’s foreign reserve fund, which is being used to prop up affected companies, is due to run dry in early 2017 at the current rate of spending, it also found.

It said that low oil prices and shoddy management were bigger factors in Russia’s economic decline.

But it said sanctions also caused uncertainty, prompting some investors to “derisk” by abandoning Russia, even if their investments had had no direct link to Western blacklists.

The US briefed press in Brussels on Tuesday (27 September) in the run-up to an EU leaders’ debate on Russia next month.

The sanctions were imposed after Russia’s invasion of Ukraine in 2014.

The US vice-president, Joe Biden, recently voiced concern that five EU leaders had publicly criticised the measures.

The Cypriot president, the Greek prime minister (PM), the Hungarian PM, the Italian PM, and the Slovak PM, among others, have spoken out against the EU policy .

Biden's remarks aside, the US is quietly confident that the EU will roll over the measures before they expire in January. Its confidence comes from German chancellor Angela Merkel’s firm stance and from the fact that nothing has changed on the ground in Ukraine.

No 'systemic' crisis

Despite its alarming figures, the US study did not indicate that Russia is on the verge of a “systemic” crisis.

A senior US official told press that Moscow could tap pension funds or other assets to cover the foreign reserve fund.

The US study also said the likelihood of hard-hit firms being bankrupted was just 2 to 3 percent higher.

The worst damage was done to companies that were specifically named as being under embargo. Those affected indirectly by “sectoral sanctions” suffered less.

The sectoral sanctions block short-term credit on international markets to some Russian banks, arms makers, and oil companies. They also ban exports of high-end technology.

The US said firms that Russia has designated as being of “strategic” importance, such as Rostec, a defence conglomerate, were the least likely to collapse.

'Disinformation'

The US official said Russia’s “disinformation” campaign in Europe had claimed that sanctions backfired on EU economies and that they made no difference to Russia.

But the study found that the sanctions' “median” negative impact on all 28 EU economies was just 0.13 percent of GDP.

The official noted that EU states which suffered the most supported sanctions, while those that suffered least were among the critics.

Lithuania (-2.8% of GDP), a former Soviet state, for instance, is a staunch supporter, but Italy (-0.07%) is Russia-friendly.

The US official said that the impact on Russian GDP was hard to “disentangle” from oil prices and other factors.

The official said that Russian counter-measurers had a cost, however. "There's no such thing as a free lunch. The money [used for state aid] could have been spent on Russian taxpayers instead", the official said.

EU extends Russia blacklist by six months

Oligarchs, Kremlin aides, and security chiefs remain banned from EU until at least March next year, but Brexit could help Russia to get off the hook on economic sanctions.

France and Russia fall out over Syria

Russian president Vladimir Putin has "postponed" a visit to Paris, as French president wanted to talk about Russian strikes on Aleppo.

Analysis

Is Germany more hawkish on Russia?

Germany's socialist foreign minister just said the EU should "step up pressure" on Russia. Merkel aired "political" doubts on a Russian pipeline.

News in Brief

  1. Far-right attack migrants on Greek island
  2. Merkel defends accepting UN refugees
  3. EU commissioner plans Malta 'money laundering' inspection
  4. Survey: Half of high polluting farms receive CAP subsidies
  5. Commission will 'not shy away' from Malta killing repercussions
  6. EU Commission opens probe on Alitalia state loan
  7. Paris suspect given 20-year sentence for Brussels shoot-out
  8. Merkel and Pena Nieto praise EU-Mexico trade agreement

Stakeholders' Highlights

  1. Nordic Council of Ministers12 Recommendations for Nordic Leadership on Climate and Environment
  2. Macedonian Human Rights MovementOxford Professor Calls for an End to the Anti-Macedonian Name Negotiations
  3. ACCAPeople Who Speak-Up Should Feel Safe to Do So
  4. Mission of China to the EUProgress on China-EU Cooperation
  5. Nordic Council of MinistersWorld's Energy Ministers to Meet in Oresund in May to Discuss Green Energy
  6. ILGA EuropeParabéns! Portugal Votes to Respect the Rights of Trans and Intersex People
  7. Mission of China to the EUJobs, Energy, Steel: Government Work Report Sets China's Targets
  8. Martens CentreJoin Us at NET@WORK2018 Featuring Debates on Migration, Foreign Policy, Populism & Disinformation
  9. European Jewish CongressKantor Center Annual Report on Antisemitism Worldwide - The Year the Mask Came Off
  10. UNICEFCalls for the Protection of Children in the Gaza Strip
  11. Mission of China to the EUForeign Minister Wang Yi Highlights Importance of China-EU Relations
  12. Nordic Council of MinistersImmigration and Integration in the Nordic Region - Getting the Facts Straight

Latest News

  1. How Russian propaganda depicts Europe - should we worry?
  2. MEPs tell Chinese ambassador of concerns on trade
  3. Greenland votes with eye on independence
  4. EU court delivers blow to anti-abortion activists
  5. Hungary activists defiant after 'Soros Mercenaries' attack
  6. European Commission proposes whistleblower protection law
  7. Secrecy of VW fraud report 'unacceptable', says MEP
  8. 'Strong suspicion' of corruption in Council of Europe assembly