The unintended consequences of the EU’s sanctions on Russia

The unintended consequences of the EU’s sanctions on Russia

Russia will be able to live with the pain of sanctions for years to come. That was the view expressed by Russians attending the Dialog-Europe-Russia (DER) think-tank in August, writes Hildegard von Liechtenstein.

The think-tank has a mission to contribute to the modernisation of Russia, a redefinition of the relationship between Russia and the European Union and an awareness of greater Europe.

The opinion of Russian participants at a small high-level conference on Russia-EU relations in Salzburg was that Russians can support and accept pain. Russia will be able to live with the sanctions for a number of years because of its national pride.

The question of Crimea is now non-negotiable for Russians.

The Russian view is that Europe will find it difficult to accept the economic and financial consequences of sanctions. Not only will Europe lose exports, it will also have to pay to maintain Ukraine during the sanctions, and afterwards for the reorientation and relaunch of Ukraine’s economy. This could cost some 400 billion euros and hit Germany particularly hard.

This is an enormous test for Europe’s cohesion and unity.

German Chancellor Angela Merkel promised Ukraine up to 500 million euros - a small drop in the total required - when she visited Ukraine’s President Petro Poroshenko in Kiev in preparation for his meeting with Russian President Vladimir Putin on August 26.

Europe implicitly made promises to Ukraine during the Maidan demonstrations which began in February 2014. Europe now has an obligation to support Ukraine financially and with free trade. It has to replace Ukraine’s already real loss of trade with Russia which could potentially be much bigger in the future.

The loss of Russian markets will have a significant impact on Ukraine’s economy as Russia is a key trading partner.

What is evident so far is that Russia cannot be pressured by sanctions. The West’s sanctions are proving to be toothless and Russia is unimpressed. President Putin’s politics has led to him gaining a rising approval rating among Russians.

It is doubtful whether the EU will be able to continue to enforce sanctions for very long in the face of resistance from some member countries and opposition from interest groups. It is also doubtful whether Europe is willing, or able, to finance rebuilding Ukraine’s economy and to open its borders sufficiently for the exchange of goods, services, people and capital. These are the four freedoms of the EU.

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