How Effective Are U.S. Sanctions on Russia? 'Peanuts,' Says Russia

The U.S. government is weighing
another round of sanctions against Russia for its meddling in
eastern Ukraine. Piling on sanctions has been America’s and the
E.U.’s most trusted way of rapping Vladimir Putin’s knuckles since
he ordered the invasion and annexation of part of Ukraine in March.
How effective have these sanctions been, though? It depends who you
ask.

“Peanuts,” says Russian
Trade Minister Denis Manturov. “What sanctions? A holy place
is never empty: If one market closes, another opens. What’s
happening today is peanuts compared to what was then,”
referencing American sanctions during the Soviet era.

Andrei Belousov, the Kremlin’s top economic adviser told
Reuters, “The sanctions in their current format don’t have
a macroeconomic effect. My assessment is that we’re
in the vicinity of 1 percent (gross domestic product
growth) and will stay there until the end of the
year.”

However, suggests Bloomberg news, “Russia’s richest
businessmen are increasingly frantic that President Vladimir
Putin’s policies in Ukraine will lead to crippling sanctions and
are too scared of reprisal to say so publicly.”

Igor Bunin, head the Center for Political Technology in Moscow,

told Bloomberg that “the economic and business elite
is just in horror.”

And, according to the Bloomberg Billionaire Index, “Amid market
turmoil provoked by the Ukraine conflict, the 19 richest Russians
lost $14.5 billion since the start of the year, compared to an
increase in wealth of $56.5 billion for the richest 64
Americans.” 

Russia’s got problems aside from sanctions. Crimea was pretty
poor under Ukraine, getting by on tourism dollars, but since no one
is keen on vacationing in a territory occupied by trigger-happy
Russian troops, the government is considering
hiking domestic taxes to ease the absorption of the peninsula.
And, Russian taxpayers are still on the hook for the roughly

$50 billion their government spent on the Sochi Olympics.

Sanctions aren’t affecting Russia alone, though. They’re having
a negative impact on business in the E.U., particularly small and
mid-sized businesses,
according to the German paper Deutsche Welle.

“These [sanctions] affected about a quarter of German
companies conducting activities abroad,” said
deputy head of the Association of German Chambers of Commerce and
Industry Volker Treier in an interview this week. He added:

Every third job in Germany depends on exports. If we interrupt
German-Russian trade, then we have 300,000 jobs that are affected
by this trade.

There are many companies that have made enormous investments in
Russia. Do they now have to pay for a political conflict? As a
spokesman for industry, I have my doubts, and we have to articulate
these doubts.

The latest E.U. sanctions, which are being mulled today, “were
designed to spread the burden among the main EU powers, affecting
German technology, Britain’s financial center and French defense
sales,”
according to another Reuters report. “Trade data show Germany
and Italy have the most to lose if the EU steps up sanctions.
Austria and the Baltic states are also heavily dependent on Russian
gas.”