Wednesday

23rd Aug 2017

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 and get 40% off for an annual subscription. Sale ends soon.

  1. €90 per year. Use discount code EUOBS40%
  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.

'I thought I was safe in Europe'

Arrest of Turkish dissident has again highlighted the way rogue regimes use Interpol to hunt their enemies inside the EU.

'Killer robots' are not about Terminator

A European signatory of an open letter about autonomous weapons says the imagery of fictional killer robots is distracting from a seriously dangerous issue.

News in Brief

  1. EU calls on Serbia and Macedonia to remain calm
  2. Schulz wants US to remove nuclear weapons from Germany
  3. Ukraine and Russia to announce another ceasefire
  4. EU to investigate Monsanto-Bayer merger
  5. US will ask Nato allies to send more troops into Afghanistan
  6. Greece to be absent at event on Communism and Nazism
  7. Czechs want observer status in Eurogroup meetings
  8. Putin sends EU-blacklisted ambassador to US

Stakeholders' Highlights

  1. European Jewish CongressEuropean Governments Must Take Stronger Action Against Terrorism
  2. European Healthy Lifestyle AllianceDoes Genetics Explain Why So Few of Us Have an Ideal Cardiovascular Health?
  3. EU2017EEFuture-Themed Digital Painting Competition Welcomes Artists - Deadline 31 Aug
  4. ACCABusinesses Must Grip Ethics and Trust in the Digital Age
  5. European Jewish CongressEJC Welcomes European Court of Justice's Decision to Keep Hamas on Terror List
  6. UNICEFReport: Children on the Move From Africa Do Not First Aim to Go to Europe
  7. Centre Maurits CoppietersWe Need Democratic and Transparent Free Trade Agreements Says MEP Jordi Solé
  8. Counter BalanceOut for Summer, Ep. 2: EIB Promoting Development in Egypt - At What Cost?
  9. EU2017EELocal Leaders Push for Local and Regional Targets to Address Climate Change
  10. European Healthy Lifestyle AllianceMore Women Than Men Have Died From Heart Disease in Past 30 Years
  11. European Jewish CongressJean-Marie Le Pen Faces Trial for Oven Comments About Jewish Singer
  12. ACCAAnnounces Belt & Road Research at Shanghai Conference