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War in Ukraine: EU sanctions against Russia appear to be having an effect

2022-07-15T05:51:22.655Z


According to a report, the EU assumes that Russia's economic output will shrink by 10.4 percent this year. The effect of the sanctions imposed on Moscow will therefore increase.


Enlarge image

Decommissioned Russian yacht Luna: Around 13.8 billion euros frozen

Photo: Georg Wendt / dpa

According to data that has been kept secret so far, the EU sanctions imposed on Russia are slowly but surely taking effect.

As experts from the EU Commission confirmed to the German Press Agency, targeted trade restrictions are now affecting Russian export transactions, which had a volume of more than 73 billion euros a year before the war.

In percentage terms, it is about 48 percent of Russia's previous exports to the EU.

Added to this is the fact that within a period of around four months, Russian assets worth around 13.8 billion euros were frozen - for example by oligarchs and other supporters of Kremlin chief Vladimir Putin.

The reserves of the Russian central bank, which are worth billions, can also no longer be accessed.

Malice from Russian state media

Putin keeps talking about an “economic blitzkrieg” by the West against Russia.

He admits that the damage to the Russian economy is great.

However, the Kremlin boss emphasizes that the West is also suffering damage - and that the giant empire is coming through the crisis better than expected.

The ruble is also stronger than it has been for years.

Russian state media reports with malice about the exploding energy prices and the rising costs for consumers in the EU.

"The available data clearly shows that the sanctions are working," said a senior EU official, who asked not to be named.

Despite the relatively short period of time so far, significant effects on the Russian economy have already been achieved.

It is also clear that the effect will become even stronger over time.

Specifically, the EU is currently assuming that Russia's economic output will shrink by 10.4 percent this year.

For comparison: In the EU, economic growth of 2.7 percent is still expected for European companies this year, despite the consequences of sanctions and war, for Germany the forecast is still plus 1.4 percent.

Drastic slump in Russia's economic output expected

Many Russians, who are traditionally tried and tested in crises and considered capable of suffering, continue to react to the situation in a demonstratively relaxed manner.

Nevertheless, surveys show that rising prices and fears of a new shortage economy are gaining ground.

In Moscow, Europe's largest city, many Western chain stores have closed, and entire rows of shops are empty in shopping centers.

Cinemas have to close because there are no more Hollywood films.

There is even a lack of color for colorful packaging, which prompted Putin to ask at the economic forum in St. Petersburg in June whether that was more important than Russia's independence.

He said that there was a price to be paid when he pushed through his policies against resistance from the West.

The war against Ukraine is meant.

The Kremlin stressed that the sanctions would never deter Russia from its course.

Many Russians have long since come to terms with the situation - and are watching blockbusters from the USA on pirate websites on the Internet.

According to EU experts, however, the sanctions will force Russia to change its economic model and continue to develop towards a self-sufficiency economy.

At the same time, supply chain problems and lack of access to advanced foreign technologies would hamper domestic production, investment and productivity growth.

It is considered unlikely that Russia will be able to meet the need for goods on the sanctions list itself or through exports from countries such as China.

Export bans do not only affect the arms industry

There are likely to be problems with the procurement of machines, vehicle parts and data storage.

However, resourceful Russian businessmen have long since created ways for more luxury cars to come into the country, for example via Russia's neighbor Kazakhstan.

Putin has always emphasized that everything will continue to exist - just at a higher price.

However, according to the EU, the EU export ban on so-called dual-use products is already crippling Russia's military capabilities.

Important armaments factories, which produce air-to-air missiles and tanks, for example, had to be closed due to the lack of imported goods.

In addition, the EU export bans affect IT companies, mobile phone providers and the Russian car industry, according to Brussels.

After the departure of western car manufacturers, Soviet brands such as the Moskvich are now being revived in Russia.

The government wants to make cheap loans possible so that people buy more cars again.

Nevertheless, many Russians lack the money.

According to EU information, Russia's civil aviation is suffering from the ban on flying into European airspace - but above all from the export restrictions on spare parts and services issued by the EU and the USA.

From an EU perspective, most Russian airlines are no longer able to meet international security requirements.

From the EU's point of view, the problems in Russia are exacerbated by the fact that, according to estimates, around 70,000 IT specialists have recently left the country and another 100,000 are likely to follow.

The coal and oil embargo are only just beginning to take effect

The experts also expect significant effects from the implementation of the coal and oil embargo that has already been decided.

The import ban on Russian coal will take full effect on August 10 - affecting a quarter of global Russian coal exports worth around eight billion euros a year, according to the EU.

The value of Russian crude oil imports to the EU in 2021 was around EUR 48 billion and that of petroleum products EUR 23 billion.

90 percent of this is to be eliminated when the import of Russian crude oil by sea is banned from December 5 – and from February 5 of processed Russian petroleum products.

gas contingency plan

ExpandBackground pane

The gas emergency plan is based on an EU regulation from 2017 that defines measures to secure the gas supply in the event of a crisis.

It provides for three escalation levels: the early warning level, the alert level and the emergency level.

Expand areaEarly warning level

The

early warning

level can be declared when there are concrete, serious and reliable indications of a possible event that is likely to lead to a significant deterioration in the gas supply situation.

It was

activated by the Federal Ministry of Economics on

March 30, 2022 .

The Russian government had previously threatened to stop gas supplies to Europe if the raw material was not paid for in rubles in the future.

Expand Alert Level area

The

alert level indicates

a disruption in the gas supply or an exceptionally high demand for gas that leads to a significant deterioration in the gas supply situation.

However, the market is still able to cope with this disruption or high demand on its own.

Economics Minister Robert Habeck (Greens) has the alarm level on

June 24, 2022

announced after the Russian pipeline monopoly Gazprom cut the flow of gas through the particularly important Baltic Sea pipeline Nord Stream 1 by 60 percent.

In concrete terms, the alert level means that energy suppliers and regional network operators can try to shed loads - for example, no longer supply those customers who have agreed so-called switch-off clauses in their contracts.

These customers purchase gas at lower prices, but have agreed not to be supplied in the event of bottlenecks.

The law also stipulates that energy suppliers can pass on their increased purchasing costs to customers at this stage – despite existing price-fixing clauses.

However, the Federal Network Agency must first have identified a significant reduction in gas imports to Germany.

Expand areaEmergency level

The

emergency level

is not activated yet.

It is proclaimed when market mechanisms are no longer sufficient to guarantee supply and the state has to intervene.

In this case, the Federal Network Agency would decide which companies would still get gas and which would have to be rationed or even shut down.

However, certain areas are specially protected by law and will continue to be supplied with gas until the very end if possible.

This includes private households, but also hospitals, educational institutions and public administration.

According to an expert, the disappearance of the EU market will result in considerable strategic problems for Russia because, according to EU figures, 45 percent of the national budget is fed by oil revenues.

Markets were already avoiding trading in Russian oil.

However, the effect is partially offset by increased demand from countries like India.

EU economy itself also affected by the sanctions

But the EU economy itself is also being hit by the sanctions.

According to the EU experts, the import bans on steel products from Russia had the greatest direct influence, as 21 percent of imports before the war came from the country.

Brussels also sees the prices of agricultural products as negative consequences of the war for the EU.

For example, after the start of the Russian invasion, the already relatively high prices for wheat rose by a further 35 percent, for corn by 15 to 25 percent and for sunflower seeds by around 33 percent.

The EU also considers further price increases to be conceivable because of the EU ban on imports of Russian wood and because of Russia's own export ban on noble gases.

According to experts, the latter could cause additional delivery bottlenecks for chips, since noble gases are used to produce semiconductors.

Another figure shows that the war is also costing the EU countries dearly: The EU Commission allowed state aid of more than 200 billion euros for companies that were particularly hard hit by the conflict, for example due to the high energy costs, until mid-June alone are.

Further approvals followed on Thursday: Germany is allowed to support energy-intensive companies with state aid of up to five billion euros.

mik/dpa-AFX

Source: spiegel

All business articles on 2022-07-15

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