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Sanctions on Russia: The risks for western business

Author : James Rodgers

The impact of sanctions on Russia -- imposed in response to the Kremlin's annexation of Crimea in 2014 -- has been 'much more moderate than those who imposed them intended,' according to the author of a new book, Russia's Response to Sanctions
16:34, 13 September 2018

Open source

The impact of sanctions on Russia -- imposed in response to the Kremlin's annexation of Crimea in 2014 -- has been 'much more moderate than those who imposed them intended,' according to the author of a new book, Russia's Response to Sanctions.

Speaking at an expert roundtable at the influential London international affairs think-tank Chatham House, Dr Richard Connolly, Director of the Centre for Russian, European and Eurasian Studies at the University of Birmingham in the U.K., argued that Russia's reaction to sanctions had enabled it to 'continue with its foreign policy course.'

Related: EU prolongs individual sanctions against Russia

Dr Connolly identified three principal approaches which had made this possible.

Firstly, what he termed a 'securitized economic policy' -- security concerns being used to justify more intervention in the economy than before -- had become 'the new normal'.

Secondly, Russian investment and production in targeted areas -- such as the oil and gas industries -- was rising.

Thirdly, and perhaps most worryingly for western investors hoping one day to benefit from an improvement in relations with Russia, and a lifting of sanctions, Dr Connolly has identified, 'a discernible shift to the non-west in trade and capital flows'.

Related: EU prolongs anti-Russian sanctions for half a year

However, Dr Connolly suggested, 'You shouldn't see sanctions as a success or a failure.' Instead, he argued, 'They should be seen as part of a wider strategy' -- not as a substitute for one.

Dr Connolly noted that the former U.S. Ambassador to Russia, Michael McFaul, had -- in testimony to Congress last week -- made a robust defence of sanctions on Russia.  In a transcript of his testimony posted on the Stanford University website, Mr McFaul described the measures 'the right, moral punishment to take in response to egregious, illegal actions even if they do not change (Russian President Vladimir) Putin’s behaviour.'

Related: Ukraine, Montenegro, Albania, Norway pledge to agree on policy of anti-Russian sanctions

Mr McFaul has long been an outspoken critic of the Russian leader's policies, and has been banned from entering Russia for the past two years. When Presidents Trump and Putin met in Helsinki in July, Mr Putin reportedly asked Mr Trump to let Russia question Mr McFaul -- an idea that the former ambassador dismissed as 'lamentable'.

While arguing that overall Russia was 'cultivating closer ties with the non-west', Dr Connolly also cautioned, 'Whether it will be successful is another matter, but a lot of effort has gone into it.'

One consequence of that effort may be that western companies find it all the harder to rebuild their business in Russia even when -- one day -- the political climate means that opportunities improve once more.

Read the original text at Forbes.

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