Russia remains under sanctions loop. Part 2

Continuation. Read the first part here.

The Russian Federation remains under sanctions, as no significant progress took place with the issues that have led to these economic restrictions.

On Thursday, June 18, it got about that the European Union has extended the sanctions package which had been imposed because of the Crimea annexation until June 23, 2021. German Chancellor Angela Merkel announced on June 19, on the results of an online summit of EU leaders that economic sanctions against Russia for military aggression in eastern Ukraine had been extended until January 31, 2021.

Ukrainian companies are looking at the East.

According to the Honored Economist of Ukraine Oleksiy Plotnikov, the continuation of EU sanctions is a political consistency from the Western partners.

Oleksiy Plotnikov, Honored Economist of Ukraine

“This is evidence that there is progress neither in the Minsk process nor in the Crimea issue. And from this point of view, Western countries demonstrate their consistency and continue these sanctions, anyway I cannot say that it will have an extremely negative impact on the neighbouring state’s economy somehow. Because the economy is quite strong, and over the years it has created opportunities to replace the economic relations with the countries of the European Union, the United States, Canada, which now prolong the sanctions, ” the expert said.

In his opinion, Russia used to be in the first position for Ukraine, while the EU was in the second position, and now they have switched the places. “Nevertheless, Russia still has a high share in trade and everything else. From this point of view, we can say that it is bad to impose sanctions as much as we want. Though Ukrainian business works with neighbours, neighbours work with the Ukrainian counterpart.  These are indicators that the business if it is profitable, finds opportunities to work. Therefore, it is unrealistic to say that this country has disappeared or that this market has disappeared. If this happens, it will not happen very soon, ” Plotnikov said.

He emphasizes, that “Russia remains a neighbour with a common border.  To cooperate, even to transport goods to this country is more profitable than to Kazakhstan or Mongolia, China. There are many things, many products that we produce, but which will not cross the European Union’s border, because there are different standards, a different culture of consumption, a different quality. And it goes to the neighbouring state, and it is possible not to standardize at all, not to improve quality, not to strive for the European level. “If they buy – let them buy” – this is the logic of such products manufacturers.

Despite the sanctions imposed by Ukraine, the State Statistics Service confirms the close economic ties of our state with Russia. According to it, Russia took the 2nd place after China in the ranking of Ukraine’s biggest trading partners in the 1Q2020.

The trade volume with the aggressor country reaches 2,543.8 billion dollars during this period, which amounts to 8.5% of the total volume. Russia’s share gradually declines, as it occupied the first place in 2018. Meanwhile, all EU countries account for 41.5% of Ukraine’s foreign trade volume (The main partners are Germany and Poland).

Ukrainian business with a focus on the Russian market has been going through the break of economic ties since 2014 heavily. That is why entrepreneurs look for opportunities to circumvent the law in those areas where direct cooperation with Russia is prohibited.

The latest confirmation of this is the searches at the Kharkiv plant “Electrovazhmash”. Joint investigative actions were conducted by the Prosecutor’s Office and the Security Service of Ukraine on June 16. According to police, the company, under the contractual relationship with a British firm form, worked with Russia. In particular, it was involved in the supply of locomotives units and work pieces to the Bryansk Machine-Building Plant.

Such cases are not isolated. Not only Russians buy, but also Ukraine in the Russian Federation gives the jobs to its enterprises, bypassing the restrictions. Worth to mention at least the high-profile “Svinarchuk case”, which included the defence parts sale to the Ukroboronprom concern enterprises at the inflated prices. Investigative journalists claimed that a significant part of the suspects’ products had been purchased in Russia, after that they were imported to Ukraine by smuggling or under “grey” schemes.

After the scandal, then-General Prosecutor Yuriy Lutsenko agreed during the Temporary Commission of Inquiry into National Security Transactions meeting that there had been many such schemes to import parts from Russia, and they have already been closed by the FSB.

There is something to snap up still

Many Ukrainian politicians, experts, and public figures insist that the government should stop almost all economic contacts with the aggressor country and there have not been taken many steps in this direction since 2014.

Andrii Novak, economist

According to the economist Andrii Novak, the Ukrainian administration has not done some crucial things so far.  “Russian capital is still present in Ukraine, property in Ukrainian companies, assets, Russian banks and their branches are still present in the Ukrainian market. All this, I believe, Ukraine should have banned immediately in the first days of aggression in the Crimea. The sovereignty and territorial integrity violation is an act of the direct military aggression, and the second day of such action, Ukraine should have stopped any Russian companies’ activities on the territory of Ukraine. That did not happen, unfortunately, and has not happened yet so far. In other words, we suffer from Russian aggression, but continue to trade with it, produce with it, enjoy the presence of Russian banks and even give them money, placing there the deposits of private individuals and legal entities. I believe this abnormal. ”

The expert noted that the answers to the question “Why there was not and there is not an adequate response?” was not given to the society by the previous Ukrainian government and is not given by the actual one.

Meanwhile, according to Novak, the combination of sanctions against Russia is an efficient tool to “force Russia to abandon aggressive policies and behaviour, not by the military but by the economic and political methods.”

“The sanctions impact is efficient today. Since their implementation against Russia, we saw the tripled Russian ruble devaluation, the devastation of one of the two Russian reserve currency funds; the significant devastation of the second fund, which lasts daily; the change of the Russian economy state from GDP growth to its decrease; the decrease of the vast majority of Russians living standards; reduce in the almost all Russian companies’ assets value – from energy to financial, “- the economist said.

The world cannot keep silence on Putin’s Russian aggression, shown in Ukraine, Georgia, Syria, Libya, and so on. It also requires a sharp response to brazen behaviour in other countries, where the Kremlin’s special agents commit physical violence against the regime opponents who had to leave Russia or those who openly criticize Moscow’s policies.

On the other hand, it is worth to admit that the many optimists ‘ hopes that the world will quickly tighten Russia with economic sanctions and force it to act in the legal field have not come true. Russia, as it turned out, is ready to lose, but not to change something drastically in foreign policy (in domestic as well). Both the “nuclear crack-head” and the Russian actions unpredictability remain strong arguments.

In this sense, the only ally of the civilized countries is TIME. Since 2014, the sanctions loop on Russia’s neck has got tightened significantly, while the Russian authorities take additional steps now that aggravate the situation even more.

The reaction of Canadian Prime Minister Justin Trudeau, who responded sharply on June 1 to Donald Trump’s attempts to invite Russia to the G7 summit, is significant. In particular, the Canadian Government Head stressed: “Its (Russia’s- Ed.) disrespect and ongoing international rules and regulations violation is the reason why it remains and will remain outside the G7.”

So it is to be hoped that sooner or later the world community will force the Russian Federation to adhere to democratic principles and respect international law. If not, the Russian administration will finally stigmatize its country as a rogue state and an aggressor which will be shunned by all the civilized world.

Bohdan Marusyak