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MOSCOW, March 17. /ITAR-TASS/. In connection with the events in Ukraine and the Republic of Crimea that has declared its independence from Kiev following Sunday’s referendum, at which most of its residents voted for joining Russia, the European Union pledges to impose gradual sanctions forcing Moscow to give up its active policy.
The EU foreign ministers may announce the second stage of sanctions at their meeting on Monday. The level includes visa restrictions, personal asset freezes and refusal to hold EU-Russia summits.
Russia considers the second stage of sanctions “a mild variant.” The characteristic was given by ex-finance minister Alexei Kudrin. However, other experts warn that the rise of the price of external borrowings will become a serious risk to Russia’s economy.
If the situation reaches the next stage of sanctions, funds Russian businesses will take abroad will cost much more because the political risk margin will be included in the loans. A total of $100 billion has been taken in 2014, Igor Yurgens, director of the Contemporary Development Institute, said in an interview with the Novaya Gazeta newspaper. In line with his forecast, the capital outflow is expected to increase to at least $100 billion and at most $200 billion this year.
“The first stage of sanctions includes visa restrictions, suspension of talks on a wide range of trade, economic , financial, investment issues, blocking accounts of officials, freezing assets of the largest state companies and targeted actions regarding state banks,” Yurgens believes.
“The first stage will not inflict irreparable damage upon the Russian economy, but the general economic situation around Russia will substantially deteriorate,” he said. Nevertheless, in line with his calculations, “the overall volume of Russian assets subject to sanctions totals some $500 billion. This is a lot. Some $150 billion is deposited only in EU banks.”
The sanctions may slow down the general economic growth, which will not result in stagnation but will slash by 1-2% the Gross Domestic Product.
The head of the Russian Union of Industrialists and Entrepreneurs, Alexander Shokhin, sees another threat: Russia’s business rating will drop under the influence of possible sanctions, investment yield will reduce and foreign companies will want to leave the Russian market. “But that’s not so easy,” Shokhin told the Komsomolskaya Pravda daily.
“Will Auchan and Metro be able to make up for their losses in Russia by constructing similar stores in, say, Brazil? If the political factor is removed, each company will make its final decision after calculating all consequences,” he said.
“The formal part of the sanctions being discussed is not so painful to Russia. But military and technical cooperation with Western countries is an exception. Russia’s military industrial sector does not critically depend on armament system supplies from the West, but there is a dependency regarding supplies of components. So this cooperation should urgently be diversified toward Eastern Asia,” Mikhail Remizov, the president of the National Strategy Institute, told Itar-Tass.
“The informal part of the sanctions may be expressed in an attempt by the United States to influence the global oil market through speculative operations on commodity markets, including through the use of internal regulation measures,” the expert said.
“In these conditions, Russia will try to win back its domestic market, only a fourth of whose domestic demand is oriented to domestic manufacturers yet. Besides, measures will have to be taken to avoid vulnerability of the ‘financial safety bag,’ the way the National Welfare and the Reserve Fund are called here, and funds will have to be placed inside the country,” Remizov said.
Besides, the president of the Association of Russian Banks, Garegin Tosunyan, does not share this approach. “I will never believe that the Americans will take measures against the Russian financial fund through which we in essence credit the US economy. This would look like an attempt to do a hara-kiri to punish your neighbor. Prudent colleagues-financiers work in Washington. They would not undermine their own currency and damage the reputation of their own country,” the expert told Itar-Tass.
“Rhetoric and emotional statements regarding Russia’s influence on Ukrainian events will soon settle down. Sanctions, if they are imposed, will be of targeted nature, will be relative and short-termed as no one needs them — neither Russia, nor our pragmatic partners in the United States and EU countries,” the financier is convinced.
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