Sunday, August 6, 2017

Sanctions reload ushers in the ‘new normal’ for Russia

RT | Aug 6, 2017

© Maxim Zmeyev / Reuters
With US President Donald Trump signing off on the latest round of sanctions against Russia over its alleged meddling in the 2016 US election, the country is resigned to living under sanctions for a long time to come.

Russian Prime Minister Dmitry Medvedev called the move by Washington “a full-fledged economic war on Russia,” adding they will “remain in effect for decades unless a miracle happens.”

History has shown how entrenched American sanctions can be. Four decades on, the 1974 Jackson-Vanik amendment that imposed trade restrictions on the Soviet Union for blocking Jewish emigration is still in force, even though the Soviet Union collapsed over a quarter century ago.

It marks a shift to a “new normal” that’s all the scarier for being impossible to undo any time soon, senior economist at Danske Bank Vladimir Miklashevsky told Bloomberg.

Europe is caught in the middle, torn between appeasing Washington and fear of losing the Russian market. The new reality also impacts European companies which must adjust their business with Russia to avoid being penalized by the US.

Officials in Germany, Austria, and France have already raised concerns over the effects of new sanctions on Europe’s energy security. Some policymakers have called them a ploy to force greater US liquefied natural gas (LNG) exports to Europe.

“We will not accept any extraterritorial use whatsoever of these US sanctions against European companies,” German Foreign Minister Sigmar Gabriel said.

Europe will come up with an “adequate” response “within days” if the newly-signed sanctions hurt the interests of European companies working with Russia, European Commission Head Jean-Claude Juncker has warned.

However, the strong words may just be an attempt to appease Russia. Reaching consensus among all EU member states to strike back at Washington may prove difficult if not impossible considering the anti-Russian stance of countries like Poland and the Baltic states.

Analysts claim sanctions targeting Russia’s energy sector could affect joint EU-Russian long-term projects, but won’t stop the vital ones like Gazprom’s Nord Stream-2 gas pipeline to Germany.

However, the price of any project automatically increases, Tatiana Mitrova, director of the Skolkovo Energy Center, told Reuters.

“Gazprom’s relationships with partners, subcontractors, and equipment and service providers are very complicated. They will all ask for a risk premium,” she said.

The issue goes beyond energy. Fear of losing the Russian market as a result of a potential response by the Kremlin is a major concern for European and American companies.

The Eastern Committee of the German Economy expects growth in exports to Russia to double this year despite all the political and economic hurdles. It has strongly opposed sanctions against Moscow, saying they could hurt European companies.

A wide range of US corporations have also started a lobbying campaign against the sanctions. ExxonMobil, General Electric, Boeing and Citigroup, MasterCard and Visa have raised concerns the punitive measures would ultimately harm their businesses, rather than the Kremlin.

Ford, Dow Chemical, Procter & Gamble, International Paper, Caterpillar, and Cummins have warned the measure could impact their businesses as well.

While President Trump signed off on the new sanctions, it is still unclear whether he will enforce the restrictive measures. Trump said that US lawmakers have forced him into signing a bill which is “significantly flawed.”

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