EU Sanctions against Russia: Economically Harmful to Russia or Politically Damaging to Whole World?

Monday, July 13, 2015

Seyyedeh Motahhareh Hosseini
Assistant Professor of Political Science & Expert on Central Asia and Caucasus Affairs

The European Union (EU) has imposed sanctions on Russia at a time that Moscow is the third biggest economic partner of EU after the United States and China, and exports a large part of its produced energy to European countries. On the opposite, EU’s exports to Russia have almost tripled during the past decade. Russian officials have frequently talked about ineffectiveness of European countries’ sanctions against Moscow and that EU member states will be the main losers of the sanctions game. Russian officials have also presented a host of documents quoting political officials of various countries as well as international organizations in this regard. Some Western sources have also supported this approach. While Russian officials keep repeating that the EU sanctions will not harm Russia, the country currently ranks the 23rd in the world in terms of inflation rate. There are also many reports indicating that the Russian government is constantly reducing its services in order to head off severe budget deficit. On the other hand, the Russian economy was already ailing and the impact of sanctions can lead to major economic gaps in Russian society, especially those gaps that result from the country’s rentier system, which is already suffering from financial corruption.

The Russian Foreign Ministry has blamed anti-Russian lobby for all actions that are being taken against Russia and has also described as meaningless, EU’s effort to put the entire responsibility of Minsk agreement for the establishment of peace in eastern Ukraine on Russia. The Russian Foreign Ministry has also described as provocative the extension of anti-Russia sanctions on June 22, which coincided with the anniversary of the Nazi Germany’s attack on the former Soviet Union in 1941. The Russian Foreign Ministry was thus alluding to the most important concern of the European countries about Russia’s ability to disturb order and stability in Europe and even open new war fronts, especially against Germany, which is in the frontline of EU’s hostile policies against Russia.

However, on the other hand, the world politics is witnessing the birth of a new crisis-ridden international system. According to Henry Kissinger, the crisis in Ukraine will lead to further escalation of tensions in Russia’s relations with the West and this issue will finally lead to a new round of the Cold War. He believes that ignoring this issue will be tragic. Kissinger has also warned the West about the sanctions it has imposed on Russia, describing them as unconstructive. He pointed out that imposition of such sanctions will cause progressive countries to find ways to defend their economies and tighten control over their markets. Kissinger, a former US secretary of state, also urged Western countries to avoid direct confrontation with Russia and, instead, advised them to cooperate with the Kremlin.

Russia is not able to diversify exports of its natural resources, like oil and gas, in the short run. Of course, this asymmetrical dependence only applies to Russia and older members of the European Union.  Among new members of EU, Russia enjoys a favorable position because these countries are heavily dependent on importing gas from Russia and in case of a complete cessation of Russian energy exports, they would face catastrophic problems. The West’s scenario to reduce global oil prices through its influence on some Middle Eastern countries will also backfire on both the United States and Arab states cooperating with it in this regard. Russia is currently making serious efforts to win Asian energy markets and is now the main source of energy for China. Therefore, it is clear that at the beginning of the second round of the modern Cold War, it is Russia that has the upper hand both at the present time and until further notice.

Despite all these facts, sanctions imposed on Russia will bring the country’s economy to a state of recession and standstill in the first place. However, from the viewpoint of politics and international system, Russians’ vengefulness cannot be easily ignored and their reciprocal response would be, most possibly, military and geopolitical in nature. In view of the grounds that exist for turmoil in Caucasus, it is possible for Russia to wage a new small war and annex more territories to its soil during the next decade. On the other hand, it seems that the United States and the West are trying to preempt Russia and wage a new war in the region by sowing insecurity in Caucasus and separate parts of Russian territory from the motherland. One must wait and see where this political marathon would lead.

Key Words: EU, Sanctions, Russia, World, Energy, Anti-Russian Lobby, Ukraine, New Cold War, Middle East, Caucasus, Insecurity, Hosseini

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*Photo Credit: Informnapalm

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