So far, the sanctions against Russia have primarily been aimed at the financial sector. Experts estimate their effect as rather low. When it comes to the energy sector, it will be painful – not only for Russia.
In the Ukraine conflict, the western allies imposed the first sanctions on Russia on Tuesday. According to experts, however, these will only have a limited impact for the time being. According to calculations by the Kiel Institute for the World Economy (IfW Kiel), an import embargo on gas in particular would hit the Russian economy hard – Russian economic output could fall by up to 2.9 percent.
For now, the sanctions are aimed at the Russian financial sector. This focus is consistent with the “strategy of gradual sanctions which the energy sector initially gentle,” says the specialist in economic sanctions lawyer of the law firm Ashurst, Olivier Dorgan. An exception was to suspend the decision of the Federal Government, the certification of the Nord Stream gas pipeline 2 for now.
Sanctions are not yet hurting Russia
According to Dorgans, the sanctions, which target Russian banks in particular, are likely to have only a limited effect – a lot of Russian capital has already been brought back into the country as a preventive measure. Freezing the assets of Russian oligarchs is also only effective to a limited extent. The sanctions “do not go so far that it really hurts,” analyzes Dorgans. However, they are a “logical step with a view to protecting European economic interests”.
Russia expert from the Center for Strategic and International Studies in Washington, Andrew Lohsen, warns that the imposed sanctions fall short of US President Joe Biden’s announcements. Russian President Vladimir Putin could feel further encouraged by this. The measures “will not make Russia change course,” predicts Lohsen.
Import ban on Russian gas?
Possible sanctions against the energy sector are likely to be more painful for Moscow – because, according to the rating agency Fitch Ratings, Russia plays a “key role” on the global commodity markets. Sanctions against the energy sector are therefore a sharp sword – according to calculations by the IfW Kiel, a comprehensive ban on imports of Russian gas from all western allies would result in a 2.9 percent slump in Russian economic output. An embargo on oil would weaken the Russian economy by a further 1.2 percent.
In the German economy, meanwhile, there is “great uncertainty,” according to the Committee on Eastern European Economic Relations. In particular, energy-intensive industries such as construction, concrete works, the chemical industry and the aluminum and steel industries are suffering from the high energy prices. The German economy now hopes that the first level of sanctions will remain and that the conflict will not escalate any further. The current situation is like a “Cold War 2.0”. It is also questionable which economic countermeasures Russia will take.
Ukraine may need economic support soon
Much will depend on how the conflict unfolds, “but in most scenarios, the economic fallout for countries other than Russia and Ukraine will be limited,” said Neil Shearing, chief economist at Capital Economics. Within the EU, for example, Germany has the strongest economic ties with Russia – but even in the Federal Republic only two percent of exports go to Russia. However, the economic situation in Ukraine is “extremely fragile”, warns Shearing. It is likely that the country will need additional financial and economic support in the near future.
Source: Stern
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