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Sanctions and counter-sanctions

Considering the problem of sanctions, introduced by the European Union states (including EU accession countries), we should first of all understand, that this problem has many sides and aspects. Different sanctions are introduced, and we should differentiate them on the several ground – depending on the character (personal and corporate), depending on the field (sanctions against petroleum companies, legal entities of the defense-industrial sector, Russian banks and other legal entities at the territory of the Russian Federation), and depending on the significance (significant and not significant).

Personal sanctions, i.e. exclusion for certain people to EU countries, not only did not cause the expected result, but even resulted in the opposite: after such a great newsbreak Russian Internet was full of petitions, in which ordinary Russian citizens asked to put them in the sanction list too. Russian public officials coldly responded on the promises ‘to find and freeze all their assets in EU’: we will not come to EU and we have never had assets in EU. Attempts to influence the establishment with personal bans for the majority of President’s team officials (including both of the Federal Assembly of the Russian Federation Chambers heads, deputy prime-ministers and advisors to President) gave no voice in the matter.

On the other hand, economic sanctions, technology, materials and outfit transfer ban for Russian companies, that produce the maximum profit to the country (first of all oil extraction industry represented by such giants as Rosneft and Gazpromneft, defense-industrial sector companies), and freeze of Russian banks accounts at the territory of EU causeв a measurable result. However the introduction of sanctions turned out to be double edged sword.

Even excluding the counter-sanctions matter (or in other words countermeasures) we can easily understand, that the European business lost a lot since the introduction of the sanctions against Russia. The lost trade has three forms. The first form is the loss of distribution area and business partners. For example, German concern Rheinmetall halted supplies of equipment to Russia. The second form is the cancellation of joint projects, which is very difficult in the context of markets globalization and widespread mutually profitable cooperation. Thus, European companies cancelled not only military projects such as cooperative engineering of IFV Atom with the French company Renault Trucks Defense and engineering small conventional submarine S-1000 from the Italian firm Fincantieri, but also cooperation projects in Fuel & Energy Complex: Dutch-British firm Royal Dutch Shell froze cooperation with PJSC Gazpromneft within a framework of joint project in Khanty-Mansyisk, and Italian refining company Saras broke off negotiations on the set up of the joint company with PJSC Rosneft, which was planned to sell oil and oil-products. The third form is the refusal of buying Russian resources, for example French company EDF Trading refused to buy Zarechnaya company steam coal, and Swiss-Dutch company Vitol broke off negotiations on the raising of credit for making the advanced payment for PJSC Rosneft oil.

The European export economy lost at least 21 billion euro by the February, 2015 (according the Spanish Minister of Foreign Affairs), and we even do not take into account the countersanctions – it is tremendous damage.

As to the countersanctions (or in other words countermeasures), introduced by Russia as a respond to the EU sanctions, Russian food import embargo turned out to be an effective instrument of international economic defense. Unfortunately, EU citizens suffered from this embargo – in 2014 German newspaper Bild with reference to the German Federal Office of Statistics, claimed that food prices were up at the FRG territory – for example, potatoes prices got up at 19,3%, tomatoes – at 35,2%, and pumpkin – at 44%. According to the information of Deutscher Bauernverband Joachim Rukwied, in 2014 German farmers lost approximately 600 million euro because of the Russian food import ban. Finnish company Valio had to invoke emergency measures and to reduce staff in 2014 as well.

Speaking about results for Russia, as previously mentioned, sanctions caused unpredictable results. Undoubtedly it happened not in a single moment, and low Russian economic indicators were blamed on the sanctions introduction results. In April, 2015, the President of the Russian Federation Vladimir Putin claimed, that Russia lost at least 160 billion dollars of potential profit. 2015th brought very high inflation rate and tangible fall of Russian GDP for 4,4%. However economic experts at the end of the 2015th noted, that this facts are caused more by fall in oil prices that by introduction of sanctions. The situation finally stabilized since Russian Government made several crisis response decisions: ruble free float, contingency appropriation from National Welfare Fund for most damaged companies, import substitution plan. The import substitution plan is a new practice for Russia, but it quickly took roots. Thus, the space industry representatives (such as Roskosmos, JSC Academician M.F. Reshetnev Information Satellite Systems and United Rocket and Space Corporation) claimed, that sanctions is not a critical hazard for the industry, it even drove value in some sort. The companies started to do a necessary conversion more quickly, to buy all necessary components from Asian providers (China, India, Singapore, South Korea), and to develop complete Russian analogs of missing parts in good quality.

Sanctions largely stimulated Russian economy to a search of alternative measures, to dynamic development and economic growth with internal resources usage. From the perspective of 2016th we can say for sure, that sanctions drove value to the Russian economy – our flexible system adopted to the new terms, amended federal budget and strategic plans and looked ahead with confidence. We should also understand that EU sanctions made Russian establishment to turn to the East – we started to work more closely with key partners Asia-Pacific Region, first of all, with our BRICS partners (People’s Republic of China and India), we do our best to develop the Far East, innovative projects, such as set up of Free Port Vladivostok literally reopen the eastern part of Russia for the economic links development.

To sum up, we can conclude, that sanctions turned out to be not only very risky, hazardous operation, but also the decision, that caused the opposite results as they were predicted. Risks from the sanctions prolongation are evident – the damage and losses can become even bigger without business relation normalization (including joint projects and reciprocal engagements). It is impossible to stabilize the situation for a long time using only centralized contingency appropriations – this strategy will explode soon. On the other side Russian economy took new terms into account and for sure will grow on in new conditions. That is why appeals to rescind sanctions are very on-target now – as earlier the claims of state leaders of certain countries (Serbia, Macedonia, Hungary) did not show the result, now the idea of rescinding anti-Russian sanctions are announced, for example, by the French President François Hollande.