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Sanctions on Russia Will Backfire

Sanctions against Russia are undoubtedly having a negative effect on the Russian economy and on the political climate in the country. But they are also negatively affecting both the U.S. and the European economies which, particularly the latter, are only now showing some signs of improvement.

Among those affected are those individuals and companies in the US who are barred from doing business in Russia, particularly with those among Putin’s closest circle of friends and associates. According to Kimberly Marten, a Professor at BarnardCollege, Columbia University in New York, by exerting pressure on Putin’s friends and associates, the West hopes that it will convince Putin to change his course of action. But that thinking ignores an important element in the relationship between Putin and his friends: the pact of KGB loyalty, writes Marten.

This is pertinent because many of the individuals targeted by sanctions have past employment or connections with the KGB or its follow-up organization, called the Federal Security Service (FSB). As a former KGB career officer and former head of the FSB, Putin knows well how to harass his opponents, such as by using sensitive materials that may lead to their prosecution.

At the same time, the West sanctions on Russia’s key industries have aggravated Russia’s economic downturn. This is complicated by the West banning co-cooperation with Russian oil firms by companies such as Exxon Mobil Corporation and British Petroleum. In 2013, $63 billion left Russia, a figure that is expected to double this year due to the political upheaval caused by the climate of instability created by the sanctions.

The US exports of food and agricultural products to Russia totaled $1.3bn in 2013. Among those affected are American poultry producers, who exported 267,000 metric tones of chicken, valued at $303mn to Russia in 2013. In addition, if Russia stops its delivery of sophisticated Russian rocket technology, NASA rocket programs will be seriously affected.

The European Central Bank recently stated that “heightened political risks” could hinder European countries’ efforts to overcome the devastating debt crisis. The European Union exports totaled 15.8bn also in 2013. Because Russia has become a key market for thousands of European companies, sanctions by the West put those companies at risk.

“Sanctions against Russia are de facto sanctions against European business,” said Philippe Pegorier, Chairman of the Association of European Business in Russia (AEB), which is the largest business association in that country. According to Pegorier, sanctions against Russia could cause 300,000 layoffs in Germany and at least 100,000 in France.

President Putin imposed a one-year embargo on imports of several agricultural products from any country or region that had adopted sanctions against Russia. That ban includes the EU, Norway, the US, Canada and Australia. Those food exports banned by Russia were worth $6.5 billion in 2013, equivalent to 4.2 percent of the bloc’s agricultural shipments, according to estimates of the European Commission. The resulting glut is worsening Europe’s already delicate economic situation.

Speaking recently on Hungary’s Kossuth Radio, Hungary’s conservative Prime Minister Viktor Orban said that “the sanctions policy pursued by the West causes more harm to us than to Russia. In politics, this is called shooting oneself in the foot.” He also said that the entire sanctions policy should be reconsidered.

Orban was joined in that criticism by his Slovak counterpart, Robert Fico, who stated, “Why should we jeopardize the EU economy that begins to grow? If there is a crisis situation, it should be solved by other means than meaningless sanctions.”

As things stand now, Russia, the US and the European Union are being hurt by the West sanctions on Russia, a truly no-win situation for all those involved. At a time of enormous strains in international relations, one would assume that it is not too late to try a different, less confrontational course of action.

Dr. Cesar Chelala is a winner of an Overseas Press Club of America award. 

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Dr. Cesar Chelala is a co-winner of the 1979 Overseas Press Club of America award for the article “Missing or Disappeared in Argentina: The Desperate Search for Thousands of Abducted Victims.”

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