Ukraine war: What are the new sanctions?

Created: 03/13/2022 13:01

By: Helena Gries

What do the sanctions do?

Numerous traders are affected by the sanctions against Russia due to the Ukraine war.

(Iconic image) © Stringer/dpa

Export stop for luxury goods, no steel imports, new trade barriers: the EU has decided on new sanctions against Russia.

However, many details are still unclear.

Frankfurt – There is war between Russia* and Ukraine*.

As a result of the Ukraine conflict*, the EU* and its allies have agreed on new sanctions against Russia*, including, for example, an export ban on luxury goods, no more steel imports and new trade barriers.

It is not yet clear what the new sanctions against Russia will do.

From the point of view of the Ifo Institute, the planned new Western sanctions against Russia will have further negative effects on the country.

The EU states had agreed on further punitive measures with the USA* and other allies due to the Ukraine war*.

In addition to an EU export ban on luxury goods and an import ban on steel, this also includes new trade barriers.

Sanctions in the Ukraine conflict: Russia is to be withdrawn from “most favored nation status”.

In terms of trade, Russia should be deprived of the so-called “most favored nation status”.

A statement by the G7 states talks about ongoing preparations for a statement by a broad coalition of WTO members.

In fact, that comes very close to being excluded from the World Trade Organization (WTO), said the head of the Ifo Center for Foreign Trade, Lisandra Flach, of the German Press Agency.

According to Flach, the import duties would not rise immediately as a result.

But without most-favoured-nation status, trading partners would be more flexible in raising tariffs or other trade barriers.

Under WTO agreements, countries are not normally allowed to discriminate between their trading partners.

This principle is referred to as most-favoured-nation status and is the central right of WTO membership.

The challenge for the global economy is how to punish a country while maintaining a rules-based trading system.

Ukraine war: sanctions as a blow to a central sector of the Russian economic system

Meanwhile, the planned EU export ban on luxury goods is primarily aimed at the many rich supporters of Vladimir Putin*.

"Those who keep Putin's war machine running should no longer be able to indulge in their pompous lifestyle while bombs are falling on innocent people in Ukraine," said EU Commission President Ursula von der Leyen on Friday (March 11, 2022) shortly after a summit of the EU heads of state and government in Versailles near Paris.

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The new EU sanctions package also provides for a ban on the import of “essential goods in the iron and steel sector from the Russian Federation”.

This is a blow to a central sector of the Russian economic system and deprives the country of export earnings in the billions, said von der Leyen.

Sanctions against Russia in the Ukraine conflict: procure missing amounts of steel elsewhere

According to the Steel Industry Association, the EU is the largest customer region for Russian steel, accounting for 30 percent of exports.

Germany accounts for around two percentage points of this.

Mass-produced steels are mainly delivered to Europe from Russia, which are used in the construction industry, for example.

According to the Bundesverband Deutscher Stahlhandel (BDS), if there is an import ban on Russian steel, traders will try to procure the missing quantities elsewhere on the world market.

The world's two largest steel producers are India and China.

They could make up for a failure by Russia, said steel expert Jayanta Roy from the Indian rating agency ICRA of the German Press Agency.

According to the Indian rating agency CRISIL, more than a third of India's steel exports have gone to Europe.

However, the BDS expressed skepticism about steel deliveries from the Far East.

Freight rates have risen several times worldwide, which makes deliveries from distant regions less profitable, said BDS board member Oliver Ellermann.

(Helena Gries with dpa)