Thursday

29th Sep 2022

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.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

  • 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.

Column

EU should admonish less, and listen more, to the Global South

Whether on Russia, or gas, or climate change, or food security, the EU's constant finger-wagging and moralising is becoming unbearably repetitive and self-defeating. Most countries in the Global South view it as eurocentric and neo-colonial.

News in Brief

  1. EU to ban Russian products worth €7bn a year more
  2. Denmark: CIA did not warn of Nord Stream attack
  3. Drone sightings in the North Sea 'occurred over months'
  4. Gazprom threatens to cut gas deliveries to Europe via Ukraine
  5. New compromise over EU energy emergency measures
  6. 15 states push for EU-wide gas price cap
  7. EU: Nord Stream explosions 'result of a deliberate act'
  8. EU okays €21bn Covid-recovery funding for Italy amid concern

Stakeholders' Highlights

  1. The European Association for Storage of EnergyRegister for the Energy Storage Global Conference, held in Brussels on 11-13 Oct.
  2. EFBWW – EFBH – FETBBA lot more needs to be done to better protect construction workers from asbestos
  3. European Committee of the RegionsThe 20th edition of EURegionsWeek is ready to take off. Save your spot in Brussels.
  4. UNESDA - Soft Drinks EuropeCall for EU action – SMEs in the beverage industry call for fairer access to recycled material
  5. Nordic Council of MinistersNordic prime ministers: “We will deepen co-operation on defence”
  6. EFBWW – EFBH – FETBBConstruction workers can check wages and working conditions in 36 countries

Latest News

  1. The European shipping giants plying Putin's fossil-fuels trade
  2. Russian ideologue and caviar on latest EU blacklist
  3. Netherlands tops EU social safety net for the poor
  4. New EU rules to make companies liable for their AI failures
  5. Can King Charles III reset the broken Brexit relationship?
  6. Meloni's navy-blockade plan to stop Libya migrants 'unlikely'
  7. Underwater explosions were detected near Nord Stream leaks
  8. EU countries stall new pesticide rules, blame Ukraine war

Join EUobserver

Support quality EU news

Join us