Sanctions Against Russia: Why Should We Care?
On July 31, 2017, six months period of the application of economic sanctions targeting specific sectors of the Russian economy will expire and discussions about an extension for the new half a year are ongoing in Brussels.
In addition to the assets freeze and travel bans around Europe for certain Russian businessmen and public officials, economic and trade restrictions associated with annexed by Russia Crimea and Sevastopol, in July 2014 the European Council adopted a new package of targeted economic sanctions against Russia. From that time, this issue became a part of the wider political debate in Europe. However, it is important to understand that economic sanctions are not as large-scale as that is described by certain Putin’s adherents. They rather have symbolical nature and reflect certain stance on Russia and its governance.
Lately in Europe the voices for mitigation or lifting of sanctions are growing in strength which is manifested even on the highest state and political level. Such politicians, as Greece Prime Minister Alexis Tsipras, Prime Minister of Hungary Victor Orban or French leader of the National Front Marine Le Pen are often repeating that sanctions achieved no success, damaging economies of their countries and the EU as a whole, and undermining strategically important peaceful relations with Russia. These statements are often supported by the argument that EU trade with Russia is decreasing and companies and governments are losing money. However, is it really so?
A drop of turnover with Russia is not about the impact of sanctions but rather a result of the stagnancy in the Russian economy which has raw-materials export model of development. Therefore, decrease in world oil prices resulted in decline in foreign exchange earnings of Russia and as a consequence in substantial deterioration of Russia’s trading capacities. A drop of exports in the amount of goods was not so rattling as in prices. Thus, in 2013, EU export to Russia was 119 billion EUR, and in 2016 only 72 billion EUR.
Moreover, economists observe that European companies are reorienting and expanding their businesses in other parts of the world and consequently pay off losses within the Russian market. The economic theory of sanctions states that those, who are imposing them are financially more sensible in the short-term period while facilitating in the middle- and long-term periods. At the same time, political effects of sanctions are visible rather in the long run. Logically, big corporations do not want to lose their markets and are trying to lobby their interests. For this purpose, they use a strategy of equating their interests to the national ones and condemning politicians who advocate prolongation of sanctions on this basis. However, these interests are of different nature and not always coincide. Sanctions rather push the companies to look for new markets, than just require more investment and shut down their capacities.
Corporations in the United States are blaming that while their government introduced substantial restrictions, European firms are winning better positions in the Russian market. The European companies use the same logic appealing to their governments by stating the better stand of American businesses under the conditions of sanctions. Companies are also missing the strategic point of view: political stability in a whole region is more important for future trade gains than short tactical adaptations to trade with politically unstable and aggressive state.
Discussions about sanctions are not only the economic game. Some Eurosceptic politicians are using them in their rhetoric to justify opposition to European position. However, countries, where such forces have political power (like Greece or Hungary) are not the main trade partners with Russia in the EU. Their economic specialization is far from sectors that are influenced by sanctions. Still, the rhetoric of the political leaders is building an image of them as the main suffering economies because of sanctions against Russia. It is plain demagogy to mobilize electorate and manipulate public opinion.
Sanctions are geopolitical issue of European security. That is especially relevant for Baltic States, Poland, and even Balkans. Appetite is growing with eating and Russian geopolitical ambitions without strict international countermeasures as during the war in Georgia and now partially in Ukraine could lead to more fire points on the political map. Last examples of Russian attempts to influence elections in the West are showing that its strategy is to deal with separate nations that are weaker as actors on international arena than the unions or coalitions of them. Therefore, sanctions against Russia are also a game for unified Europe.
Last but not the least, sanctions raise moral dilemmas and question of values. Russia is apparently playing the game of undermining liberal-democratic values and peddling the ideas of “Russian world”.
UN report of March, 2017 estimates that from the starting of the conflict in Eastern Ukraine over 2,000 civilians were killed in hostilities and it is conservative number based on available data. Thus, sanctions are not only about economy, politics or morality — they are about human lives.