FACTS,ISSSUES AND OPINIONS WESTERN SANCTIONS ON RUSSIA & IMPACTS ON ECONOMY

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  /   1211   /   31 December 2014, Wednesday

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Russia plays a significant vital role not only in Ukraine, but also in Syria, Iran, the Middle East, Libya”.

  

FACTS,ISSSUES AND  OPINIONS  

WESTERN SANCTIONS ON RUSSIA AND  IMPACTS ON ECONOMY 

Recently  couple of days ago  Ukrainian lawmakers just approved an austerity law that would make tax legislation easier and impose additional duties on imports in a bid to elevate revenue to assist for  challenging  the country's economic crisis Meanwhile The tensions between West and Moscow  intensified  in March following a decision by Ukraine’s then autonomous region of Crimea to join the Russian Federation. The move triggered annoyed reactions from the European Union and the United States, both of which imposed several rounds of punishing  measures against Moscow over the crisis in Ukraine, targeting the country’s banking, energy and defense sectors. Russia, for its part, has also imposed retaliatory bans. Though  the Russian rouble stabilised this week after plunging to record lows against the dollar earlier in the month. Now the Russia is experiencing a  turbulent crisis . The Russian economy has constricted for the first time in five years after falling oil prices and sanctions imposed by western governments began to take their toll. In August of that year, fears of a rouble devaluation led to the downfall of Russia’s stock, bond and currency markets. What a collapse. The central bank unveiled emergency measures, but were unable to beat the markets.   Oil prices have dropped below $60 a barrel, a gigantic problem for Russia, where oil and gas revenues finance more than half of the state budget. Russian authorities were banking on oil prices of $100 per barrel in 2015 to balance the books and are forecasting a sharp recession if prices remain at current levels. US plans more sanctions as Russian ruble sinks deeper. Why so ? Because  Western Nations have recurrently accused Russia of involvement in the Ukraine crisis, by providing  weapons and troops to the separatist rebels. Although Russia denies these claims, the sanctions are there. But a leading US ratings agency, Standard & Poor’s, cautioned and warned  on 25 December it might downgrade Russian bonds to “junk” status in January.and the fact can also be correlated with Middle Eastern Foreign Policies of Russia. 


First of all Chancellor Angela Merkel told press at an EU summit in Brussels - focusing on the Ukraine crisis, EU sanctions and the plummeting ruble.  18 December   that each of the  Western economic sanctions   against Russia  was imposed for specific reasons and can be lifted only if the reasons are no longer there. "She said they decided that the measure for lifting sanctions will be the territorial integrity of Ukraine and  accused Moscow of breaching  international law and putting the European order in jeopardy over the issue.”  

Merkel spoke to her Russian counterpart by phone , noted that he has made many promises. However Russia continues to ignore  several items in the so-called Minsk peace plan and all she can do is “hope” that a recent ceasfire will hold. So she highlighted  they  want to see  Putin’s promises  implemented. 

 Federica Mogherini, the EU’s foreign policy chief, has said the bloc should launch a new “debate” with Russia aimed at ending the “confrontation” over Ukraine. 

She told Italy’s La Repubblica daily on Saturday (27 December): “The current situation is very difficult for Russia. It would be in its interest to contribute to ending the conflict. Simultaneously, we all aware of the fact that  Russia plays a significant vital  role not only in Ukraine, but also in Syria, Iran, the Middle East, Libya”.

The Russian ruble the ruble’s 52 (*) percent plunge this year, driven down by dropping oil prices as Moscow also deals with international (Western) sanctions over the Ukraine conflict.   

Russian banks are frozen out of western capital markets, as a result of EU and US sanctions over Russia’s actions in Ukraine. As a result, banks must turn to the central bank to help them refinance their debts, further straining resources. 

On the basis of the article the leading dominant figures on the left and right in Berlin have voiced different opinions regarding  how the EU should handle Russia’s rouble crisis and how Germany split on different opinions and attitudes. The opinions expressed in this article do not necessarily reflect  my own views and opinion and aiming the highlight the facts and issues pertaining the Russia Crise and West Sanctions.  

Initially Wolfgang Schaeuble, the finance minister from the centre-right CDU party in the grand coalition,  showed   petite empathy and understanding  in an interview with the Rheinische Post daily on 24 December He  expressed his opinions ,its obvious the fact that they are concerned about the recent developments in Russia  But that doesn’t  imply that  they accept that Russia can impose its interests by military means. The annexation of Crimea and Russia’s perpetual violation of the ceasefire in Ukraine cannot persist without consequences. I hope every day that Russia will return to co-operation with the West, but until then they are sticking to the sanctions

Being asked about the  consequences a Russian default could have for Europe, he added: “It is up to Moscow to prevent them”. Meanwhile  the centre-left SPD’s foreign minister, Frank-Walter Steinmeier, speaking in Der Spiegel one day earlier, said a Russian economic collapse is  a jeopardy for Europa and the current situation “can’t permit them  to go straight back to business as usual”.

He said this is why he oppose any further tightening of the sanctions. Anyone who wants to bring the Russian economy to its knees is absolutely erroneous if they contemplate that this will convey about greater security in Europe”. He added it cannot be in theirour interests for this to spiral completely out of control. They should bear this in mind iin their sanctions policy.

Steinmeier said the EU and NATO should hold more talks with Russia to alleviate its trade concerns and to avoid the risk of an accidental military confrontation. And questioned “Even during the coldest days of the Cold War, these types of talks (between NATO and Russia military experts) were held. What manoeuvres, movements of troops, and overflights are taking place? Those ae the topics that has to be discussed while ruled out the idea of Ukraine joining NATO in the near future. Apart from these , also noted Ukraine accession  wasn’t even raised at the last NATO council meeting, let alone debated. Sometimes what is not said at a summit is also crucial. 

The German comments came ahead of Ukraine-Russia peace talks in Minsk on Christmas eve and ahead of an EU foreign ministers’ debate on Russia sanctions on 19 January.  The peace talks broke off without a result, but were  expected to resume on the summit 

Dmitry Polevoy, the ING Bank’s chief economist on Russia, also told Reuters that “near-term prospects for the rouble remain highly uncertain”.

The rouble crisis has seen the price of basic commodities, such as bread, rise steeply in 2014.The main reason is a prolonged slump in oil prices. But EU sanctions on Russian banks and energy firms are making matters worse by stopping the blacklisted firms from buying debt on international markets.Three listed banks - Sberbank, Vnesheconombank, and VTB - have appealed the EU measures in the EU court in Luxembourg on technical grounds.

Well now another correlation with Middle Eastern Policies. He noted that The EU has suffered a series of high-profile court defeats on sanctions in Iran and Palestine due to lack of hard information shared by member states with judges.But a court challenge can take up to two years to reach a verdict/conclusion  and no listed company has ever won financial damages from the EU tribunal.


Finally Russian rouble rebounds after  following government orders to five state exporters to sell the foreign currency reserves  which can be deemed as informal capital control measures.These were the fact and issues regarding the  dynamics of the current status of Russian Economy suffering recession and Western Opinions regarding the Sanctions . 



H.Çiğdem Yorgancioglu 

www.cigdemyorgancioglu.org 



[1] http://www.europa-nu.nl/id/vjpu7y2w8wwy/nieuws/merkel_eu_strategy_is_to_maintain_russia?ctx=vhkuiga832pv&tab=0

 

[1]http://www.dw.de/russia-sanctions-to-stay-merkel-says-ahead-of-eu-summit/a-18138454

 


 


[1]http://www.bloomberg.com/news/2014-12-16/ruble-snaps-six-day-loss-on-surprise-rate-increase-to-17-pe...

[1]http://www.theguardian.com/business/2014/dec/16/falling-rouble-all-you-need-to-know


[1]http://www.europa-nu.nl/id/vjq1dqm5r9yc/nieuws/germany_split_on_how_to_handle_russian?ctx=vhkuiga832...

  

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