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Do sanctions bode ill for Russia?

July 17, 2014, 15:37 UTC+3 Alexandrova Lyudmila

MOSCOW, July 17. /ITAR-TASS/. Russian experts differ over the anti-Russian sanctions newly adopted by the US and the European Union. Some say they will have no serious economic consequences, while the others believe the sanctions are grave but can even have a positive effect on the Russian economy over the long term.

The US started the sanction streak by announcing its package of prohibitive measures on Wednesday. These are sectoral sanctions against Russia’s four major companies — the state-owned oil company Rosneft, NOVATEK gas company as well as the state-owned Gazprombank and Vnesheconombank (VEB). The US companies are now prohibited from lending to the sanctioned companies for more than 90 days.

The sanction list has also been expanded with eight defense industry companies, most of them branches of Rostec corporation. The so-called blocking sanctions cease all US contacts with the companies and freeze their assets in the US banks if detected. The US has also expanded the list of sanctioned Russian officials.

Meanwhile, leaders of 28 EU countries confirmed new sanctions at the summit that ended in Brussels on Thursday night but in contrast to the US did not adopt sectoral economic restrictions. Instead, they have agreed to prepare by the end of July an expansion of Russian and Ukrainian black list that will comprise organizations and individuals who materially or financially supported actions that, they believe, disrupted Ukraine’s territorial integrity. The EU stopped lending for Russian projects from its budget and instructed the European Bank of Reconstruction and Development (EBRD) and the European Investment Bank (EIB) to suspend new transactions with Russia.

The most important thing is that the US and EU are going in different directions, believes lecturer at the Institute of Natural Monopolies Research (Russian Presidential Academy of National Economy and Public Administration, or RANEPA) Vladislav Ginko.

“Yesterday, the EU leaders had a tougher stance,” he told ITAR-TASS. “As for the EBRD and EIB, the volumes of transactions and projects are insignificant. The sanctions will rather deliver a blow to the organizations themselves.”

“In fact, the EU did not join sanctions against defense companies and banks,” the expert said.

Meanwhile, the US sanctions did not affect daily operations of the Russian companies but just restricted lending term to 90 days, Ginko added.

“The US has started an economic Cold War but it will have no serious effect on Russia,” the economist believes.

Deputy Dean of the HSE (Higher School of Economics) Faculty of World Economy and International Affairs Andrey Suzdaltsev is less optimistic in this respect. “Sanctions against such companies as Rosneft playing an important role for the Russian budget are a big deal,” he told ITAR-TASS. “The word ‘sanctions’ is intimidating, and it is not accidental that the companies’ stocks are already down.”

The expert believes the US “is groping for the Russian economy’s weak points and trying to expand its actions in this direction”. The US had acquired the taste for sanctions and would wield them at every opportunity, Suzdaltsev added.

Europe’s position is also not a reason for optimism, the expert believes, as “the Europeans assert their own interests that are just different from that of the US.”

Sanctions act in two opposite directions - the positive and negative ones, Professor at state economic regulation department at RANEPA Yevgeny Ishchenko told ITAR-TASS. “The first one implies inevitable economic aggravation. The second - Russia’s attempts to find its own way, become self-reliant, succeed in import substitution and stimulate export,” he said.

The negative influence would be more perceptible in the following months, the expert said, but did not rule out dominance of the positive effect over the long term.

Either way, the new US sanctions are real: “Their political importance is exaggerated there and downplayed in Russia but they are real.”

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