New U.S. sanctions against Russia: Infernal, but not too much

Volodymyr Ohryzko
17:50, 27 August 2018
Politics
542 0
Opinion

Sanctions that some experts branded "infernal" will be effective for last at least a year and include a ban on arms sales and financing of arms deals, restrictions on lending by U.S. government agencies, and a ban on exports of dual-use goods and technologies. Also, a ban is imposed on foreign aid to Russia, with the exception of emergency humanitarian aid and food supplies.

But these sanctions can hardly be called "infernal," at least for now. After all, they could be considered such when the economy of the targeted country immediately starts limping heavily. But it would be premature to claim this will be the case upon their introduction.

Russian economy has a certain safety cushion, although the trends are rather sad

Another thing is the sanctions foreseen by the end of the year. That's if Russia allows Americans to check whether it continues to manufacture chemical weapons. And here we are talking about the serious consequences for the Russian economy. As a matter of fact, it is a question of further financial bans and the actual disconnection of Russia from any technological developments without which it will not be able to grow – in particular, it's about dual-use products that can be used for both peaceful and military purposes. This is something that Russia abuses when it uses certain spare parts specifically for military purposes. And without U.S. technology, development of, say, Russian rockets will remain only on paper.

In addition, the second package prohibits Russia to use the U.S. dollar for settlement transactions. Since the ruble is not an international currency, it means that Russia will have problems with settlements, so any economy in this case will not be able to work effectively.

But, apparently, and this is not the end of the story. After all, if we remember what happened after the war in Afghanistan, after the shooting down of a Korean airliner by Russians in the early 80's, the sanctions were much more severe back then. For example, then all flights were banned from Russia and this was immediately reflected on this area of the economy. Also, then there was a serious effort to deter the Russian military-industrial complex, and this had its effect, too. And now, the Russian economy is not facing any infernal effects so far. But this step - the introduction of new restrictions – was definitely a necessary one.

In order for sanctions to really affect Russia, it is necessary that all these steps be comprehensive

Russian economy has a certain safety cushion, although the trends are rather sad. Now, it has gone into a state of deep stagnation, and figures indicate that there is no forward movement. On the other hand, that safety cushion is approximately $450 billion, and only about half of this sum has liquidity. It turns out that they can only use $200-250 billion, and, given the serious defense spending, the support of the occupied territories in Ukraine, Georgia and special expenditures for Chechnya, the funds will be enough for literally 3-5 years. Plus, a significant impact on the Russian economy has the price of oil, and if the U.S. now decides to put the Russian economy on its knees, oil prices will crawl down and this will create big risks that will not be covered by gas exports.

If Americans are going to impose sanctions against Nord Stream companies, this will also have a negative effect on the economic situation. The total cost of the project, according to various estimates, is about $10 billion. So, it's unlikely that any company or group of companies will be willing to give up half of these funds. Given that sanctions on companies will be swift, on the one hand, this can deepen the split between Europe and America, and on the other hand, it will be a clear signal for those who want to occupy two chairs at the same time.

In order for sanctions to really affect Russia, it is necessary that all these steps be comprehensive. And such actions should be supported by European partners. But we will hardly see any visible effect of any steps of a "single shot" nature.

Volodymyr Ohryzko is a head of the Russia Research Center, former Minister of Foreign Affairs of Ukraine

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