How the cost of anti-Russian sanctions on the French economy has been largely underestimated
December 2, 2016 – Fort Russ News –
Mathieu CROZET, interviewed by ATLANTICO, translated by Tom Winter –
Note: NATO’s self congratulatory boast on the damage to Russia,
“In sum, Western sanctions have been a success in terms of the proximate goal of inflicting damage on the Russian economy,”
has been countered in many sources, several right here on Fort Russ. This item, from July 15, serves as an intermediary summing up as the folly continues…
If the sanctions were said to be “intelligent,” that is to say, would cost the issuing countries nothing, the reality is quite different: in a year and a half, the 37 countries that imposed sanctions it are cumulatively close to $60 billion in losses. A figure that remains below the damage inflicted on the Russian economy.
Atlantico: On the 2014 annexation of the Crimea by the Russian Federation, the European Union decided to impose economic sanctions. How could they weaken French companies? And at what cost?
Matthieu Crozet: The referendum in the Crimea effectively signaled the attachment of this region to Russia. From this point on, the United States and the European Union imposed a number of diplomatic sanctions and other so-called “intelligent” sanctions, that is, intending to disrupt the political game of the target country without engendering costs for the issuing country. Finally, 37 countries ended up imposing them, and these alone account for more than 60% of world GDP. Similarly, this series of sanctions is distinguished by the fact that for the first time it is an important country that is targeted and not a power like Iran or Cuba.
Then came a second wave of sanctions involving the cessation of several levels of diplomatic and cultural cooperation, as well as the freezing of certain assets of Russian and oligarchic dignitaries and entities, as well as the withdrawal of visas.
[In the next three paragraphs ‘sanctions on Russia’ are actually limitations on what EU states can do… –tr]
But the EU has also imposed a number of very tough sanctions with a view to Ukraine and especially the Crimea, such as prohibiting European companies investing or providing tourist services.
Another type of sanction concerns export control for products such as military, dual-use (military and civil) products such as electronic components. This last sanction penalized the aeronautics sector in France.
In June 2014, after the episode of the crash of the Malaysian Airlines plane over Ukraine, Russia underwent new sanctions, this time less soft ones, since it was to prohibit the export of sensitive products such as mining technologies, for example. But also financial sanctions aimed at the financial field: i.e. by preventing the main Russian banks to finance themselves on the European and American markets.
Atlantico: You have recently studied the impact of these sanctions on several economies, including France. What did you observe? How have the French economy and its businesses been affected by these sanctions?
Matthieu Crozet: The study we have done is limited and focuses on exports to Russia.
All trade with Russia collapsed, as the crisis in Russia led to a fall of the ruble. In the end, we saw a reduction in exports of about $60 billion for the 37 sanctioning countries over a year and a half. In July 2014, when the level of sanctions increased, Russia responded by putting an embargo on the main line of agricultural and food products. The embargo has a very clear effect and reduced prohibited exports by 80%. But these products, at the level of the economy of the countries issuing the sanctions, are negligible.
For other products, the decline is much greater. Most of the trade loss is related to products that are not under Russian embargo (service sector, luxury goods for France, etc.). The most affected is Ukraine, the second is Germany, which absorbed most of the costs with 27% of the total losses. France accounts for 5.6%.
Over the period January 2014 – June 2015, France lost an average of $176.94 million in trade with Russia every month. This represents -22.22% of the trade potential. For agricultural products under Russian embargo, the loss reached 50% of the trade potential over the period (which covers a time before the embargo).
In value, the loss of trade for these products is valued at -$ 14.19 million per month. In the end, the loss of trade in products under Russian embargo represents less than 10% of the total trade loss of France.
On the other hand, we observed that there has been no boycott effect.