The US extended its sanctions against Russia by 12 months at the start of March, but the EU is dragging its heels, and with good reason. For example, Ireland has lost €350m of exports over the past 12 months.
US president, Barack Obama, announced his decision to continue sanctions against Russia, just a few days ahead of the expiry of the originals, which were put in place over the “undermining of the territorial integrity or stability of Ukraine”. The renewed sanctions will be valid for one year, until March 6, 2017.
Meanwhile, the EU has also agreed, in principle, to renew its sanctions against Russia, for a further six months, but the current regulation ran out on March 15 and, at the time of publishing, there has been no official announcement by the Commission of a renewal of the sanctions.
Russia, in a tit-for-tat response, banned a range of imports, mainly agri-food, from the EU, the US, Canada and Australia. Some EU countries have felt the impact of the sanctions more than others.
Ireland was particularly affected, losing 48% of its goods export to Russia in the past year, whereas the impact per the EU’s other 28 countries was half of this, in percentage terms. Fresh fruit and vegetables, meat, dairy produce, and various other foods were particularly affected by the Russian ban.
Germany has appeared especially reluctant to ratchet up sanctions. That is not surprising, as German exports to Russia totalled €38bn — the highest in the EU. More importantly, Germany gets more than 30% of its oil and gas from Russia.
Italy is also highly dependent on Russian energy and some of Russia’s former Soviet bloc neighbours rely 100% on its gas deliveries. The EU’s trade with Russia — worth nearly €210bn in 2015 — dwarfs US-Russia trade, and, hence, the divergence of aggression, in terms of sanctions renewal.
Exports and imports between the US and Russia were €24bn in 2015, down by €10bn from the previous year. This compares with lost trade of €80bn by the EU.
Britain is also reluctant to inflict any further hurt on Mr Putin’s rich and well-connected friends, though the asset freezes. London is a popular haunt for Russia’s business elite, many of whom have bought expensive properties in Britain. For Russia’s battered economy, 2016 already looks miserable. The ruble has slumped to record lows, as oil prices have slid since January.
The government, which gets nearly half of its revenue from oil and gas, is scrambling to plug a 1.5 trillion-rouble (€17bn) hole in its budget. The IMF forecasts that the economy will shrink 1% this year, after contracting 3.7% in 2015.
As grim as the numbers are, they may understate the increasingly dismal prospects for a country that, only a few years ago, was enjoying its greatest prosperity. The prospect of a crippled Russian economy on its door-step is the last thing that German Chancellor Angela Merkel wants, as sluggish growth continues across the EU.
The EU has tied its sanctions to the implementation of a peace deal that Germany and France negotiated between Moscow and Kiev, many points of which have still not been implemented. Irish exporters also look forward to an early return to normalised trading relationships with Russia.