Interview: Top Economist Felbermayr Discusses the Impact of EU Sanctions on Russia
Turkey maintains an exemplary stance amidst Russian economic penalties
The European Union's latest sanctions package, targeting Russia's shadow fleet and additional Russian companies, may seem like a repetition of past measures. However, Gabriel Felbermayr, a renowned economist, offers an insightful analysis of how these sanctions still impact Russia, although they might not necessarily deter Putin from the ongoing conflict in Ukraine.
In an interview with ntv.de, Felbermayr explains that while the existing sanctions have not significantly changed the Kremlin's cost-benefit analysis, they have made it more difficult and expensive for the Russian regime to violate international law. The tightening of sanctions further isolates Russia and pushes it towards partnerships with countries like North Korea and Iran, with potential consequences for Russia’s economic prosperity and war financing.
Although the EU's sanctions have reduced trade with Russia, some sectors remain unaffected, such as pharmaceuticals. Studies show that Russia has managed to bypass the existing sanctions by expanding its trade relationships with countries like China, India, and Iran. In the financial markets, cooperation between central banks, insurance services, and payment systems has also increased.
One notable example is oil trade with India, now conducted in Chinese currency. Russia has also lowered product standards in trade with other countries, enabling the import of military technology from North Korea. The West had not anticipated other countries would benefit actively from these sanctions, but Russian oil has indeed flowed more to India than originally expected.
Felbermayr emphasizes that despite Russia's ability to circumvent the sanctions, they still impose costs on the Russian economy. The 17th and 18th sanctions packages have increased these costs. If Russian oil were to flow through new pipelines to China, the sanctions against the shadow fleet would be largely ineffective. However, Russia has so far hesitated to bear the high costs of building a new pipeline system, preferring to continue using ships, even though they are part of the sanctioned fleet.
In terms of secondary sanctions, Felbermayr suggests that engaging in talks with central Asian countries and Turkey could be necessary to enforce stricter trade restrictions. However, he warns against the high costs and potential risks such measures might entail. For instance, secondary sanctions could strain relations with Turkey, a country the West might need as a mediator and constructive partner in resolving the conflict in Ukraine.
Regarding the role of the United States, Felbermayr highlights that due to their geographical location, the US has less intense trade with Russia than the EU. Moreover, the US has significantly reduced its trade with Russia since the annexation of Crimea in 2014. potential new sanctions could target digital services, but their effectiveness has been questionable thus far.
Overall, Felbermayr considers the current sanctions packages to be correct. The new sanctions are largely symbolic, but the alternatives have significant drawbacks. As for the future of the sanctions, the economist suggests considering secondary sanctions or sanctions in areas previously banned for humanitarian reasons, but he cautions that such measures come with their own set of challenges and risks.
Christina Lohner interviewed Gabriel Felbermayr
Sources: ntv.de
Topics: Russia, Sanctions, Attack on Ukraine, EU
- The tightening of employment policies within the European Union could help in enforcing stricter trade restrictions against Russia, as it may discourage businesses from engaging in lucrative but sanctioned deals with the Russian regime.
- The ongoing sanctions on Russia have pushed the Russian government to seek alternative sources of financing, such as through partnerships with countries like North Korea and Iran, highlighting the need for a comprehensive general-news, politics, and finance strategy to address such developments.
