Brussels.
Explosive balance sheet on the Ukraine war: was the effect of the sanctions overestimated? The five most important penalties – and what they achieve.
These sanctions against Russia are unique: a 300 billion treasure and many private assets are frozen, airspace is closed, technology exports stopped, financial transactions blocked. Almost a year ago, the European Union imposed unprecedentedly severe punitive measures on Russia for its attack on Ukraine. But what do they have sanctions really works?
It’s nine now sanction packages with 500 individual measures in place, most recently an import ban on Russian oil – all to weaken Russia’s finances and industrial base, increase its inflation and increase its ability to warfare to restrict. The balance sheet is sobering. Do some action Russia really hurt, some will hurt later – but others have been completely overrated. Five penalties and a conclusion:
Entry and asset freezes for Russians: why they are overrated
With the start of the war in Ukraine, the EU drastically increased its punitive measures against individuals and organizations. In the meantime, almost 1,400 Russians and 171 institutions have been registered: assets they may have in the West are frozen, they are no longer allowed to travel to the EU – including President Vladimir Putin and his alleged partner Alina Kabaeva, who is close to the Kremlin oligarchsMPs, ministers, governors, military, prominent businessmen.
The aim is to hit Putin’s supporters in such a way that they put pressure on the Kremlin ruler War to end. Result: So far, the 27 EU countries have frozen assets of over 20 billion euros – a manageable sum in view of the many super-rich affected. In fact, the public hype is about this sanctions list, to which new names are regularly loudly put, disproportionate to the effect. Cyprus, Greece and Malta, where many Russians have second homes, are reluctant to impose fines. In addition, many rich Russians have hidden their wealth in the West in letterbox companies or with straw people in good time.
Ukraine war – background and explanations for the conflict
Oil import ban: why it really hurts Putin
The oil embargo and related oil price cap, which came into force in December, is costing Russia a lot of money: it is missing revenue of 160 million euros. Per day. If the ban on the import of Russian refinery products such as diesel or kerosene also applies on February 5, the loss is likely to increase to 280 million euros per day.
By the end of the year, Russia will therefore lack income of almost 100 billion euros. That tears a huge hole in Putin’s war chest. The new sanctions are a major obstacle, Russia has to sell its oil at high discounts, says Janis Kluge, Russia expert at the Berlin Science and Politics Foundation (SWP).
Russia: Financial sanctions fall short of expectations
Unprecedented financial sanctions: Immediately after the war began, many Russian banks were decoupled from the international financial flows of the Swift system. You should no longer be able to participate in international payment transactions. Companies find it harder to get capital abroad and have to pay higher interest rates. Ironically, the particularly important Gazprombank is exempt from the sanctions.
Explosive: Around 300 billion dollars in Western foreign exchange reserves of the Russian central bank were frozen. A long-range new sanctions weapon. French Economy Minister Bruno Le Maire spoke of an “economic and financial war against Russia.” In fact, the country was technically insolvent in the summer, which has weakened international creditworthiness.
That financial system has not collapsed, as hoped in the West. Some of the international financial transfers now run via the Chinese alternative system Cips. The blocked foreign exchange has Russia offset by hard currency from energy sales. Heribert Dieter from the Stiftung Wissenschaft und Politik criticizes that the financial sanctions have shaken non-Western countries’ confidence in the reliability of such transfer systems and spurred the search for alternatives.
Export bans: “A heavy blow to the arms industry”
Massive trade restrictions: Numerous goods can no longer be exported to Russia from the EU (and similarly from other western countries). is affected cutting-edge technology such as quantum computers, powerful semiconductors, but also drones, technology for the energy industry and many machines and luxury cars. In addition to oil, coal, steel, gold, cement, wood, paper and plastics, caviar and vodka may not be imported from Russia.
“The sanctions are particularly effective for high-tech products such as computer chips, without which modern weapons do not work,” says economics expert Gabriel Felbermayr. A new analysis by the Brussels think tank Bruegel Institute comes to the conclusion: “The direct aim of the sanctions seems to have been achieved. Russia’s imports of sanctioned goods fell much more than imports of other products.” A continuation would “fundamentally undermine the productive capacity of the Russian economy”.
Ukraine Crisis – The most important news about the war
The director of the German Society for Foreign Relations (DGAP) in Berlin, Guntram Wolff, also believes: “Sanctions work by weakening Russia’s economic base and, above all, preventing access to critical technologies. In particular, semiconductors, chips and precision parts cannot currently be obtained in Russia. This has a concrete impact on the weapons and vehicle industries relevant to the war.”
So the production got more modern anti-aircraft weapons had to be discontinued due to the lack of electronics from Germany, there was a lack of modern cruise missiles: the armaments industry had been dealt a “heavy, irreparable blow”.
The automotive industry is also badly affected. It temporarily stopped production, and now vehicles with less technical equipment are being delivered. According to official information, the gross national product shrank by just under three percent in 2022, less than expected. But the number also includes the drastically increased armaments production.
In March, however, the experts at the US investment bank JP Morgan had one economic slump predicted by over 30 percent. After all, private consumption fell by ten percent. According to the federal government, German exports to Russia have roughly halved. More than a thousand Western companies have voluntarily withdrawn from Russia – but new studies show that there has been no large-scale exodus.
Russia’s aviation: the dangerous damage is yet to come
No technology for aviation: The EU has closed its airspace to all Russian-owned, controlled or registered aircraft – they can no longer land, take off or fly over the EU. At the same time, the export of aircraft and equipment to Russian airlines is banned, including all services. So the airlines can too no spare parts buy from Boeing or Airbus.
Since three quarters of the commercial fleet comes from the west, the embargo has serious consequences, some of the aircraft can no longer be used. However: The expectation that the aviation industry would collapse in the summer has not been fulfilled: the Russian airlines dismantle aircraft in order to be able to repair other machines with the spare parts. But in a year or two, aviation is likely to become less safe.
The sanctions record: The EU has raised false expectations
The conclusion: The sanction balance sheet is mixed. The European Union initially completely exaggerated the effect of many measures, probably also to allay concerns. It was an illusion that this would quickly stop the war.
Many sanctions take time. They are therefore mostly not useless. Former Russian Deputy Energy Minister and dissident Vladimir Milov says expectations that the sanctions will hurt the economy and Putin’s regime It was unrealistic from the start – Putin had been preparing for this since 2014. “But don’t be fooled,” warns Milov. “The sanctions are actually hampering the Russian economy.”
More articles from this category can be found here: Politics
