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f+h Intralogistics 4/2015

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f+h Intralogistics 4/2015

INVESTMENT POLICY The

INVESTMENT POLICY The sanctions and Russian business Sven-Boris Brunner In the wake of the Ukraine conflict, the EU has placed economic sanctions on Russia. The Russian government reacted with its own sanctions in return. The following article examines the sanctions and their consequences for companies, and provides a forecast for Russian business in the coming years. The sanctions on Russia affect a number of fields. Starting from travel restrictions for certain persons to financial sanctions to trade restrictions on goods and services as well as trade and investment restrictions with regard to Crimea and Sevastopol (Council Directive (EU) No. 692/2014 dated 23 June 2014). Sven-Boris Brunner, Member of the Militzer & Münch Group Management and Managing Director M&M Militzer & Münch GmbH, Germany In line with the escalation of the crisis over the annexation of Crimea, the European Union (EU) has been trying since March 2014 to influence Russia’s course of action. By means of economic pressure, the country is to be prompted to bring about a change that will lead to the stabilization and pacification of the conflict; Russia, after all, being seen as the main originator of the conflict. On 22 June 2015, the Parliamentary Assembly of the Council of Europe resolved to extend the economic sanctions against Russia until 31 January 2016. Russian sanctions on the EU In response to the restrictive measures from the EU, Russia reacted with trade sanctions against the EU; a Presidential Decree dated 16 Aug 2014 imposes an import ban on certain agricultural products and foodstuffs. Primarily, this affects meat, cheese and vegetable products, which Russia had imported to date. The goods are subject to the Russian Government Directives No. 778 dated 7 August 2014, and No. 830 dated 20 August 2014, and No. 625 dated 25 June 2015. In addition, Russia imposed visa and entry bans on 89 persons, primarily from the financial and political sectors. In view of the 8 f+h Intralogistics 4/2015

INVESTMENT POLICY 12-month extension of EU sanctions on Russia, President Vladimir Putin in turn issued a Presidential Decree prolonging the validity of Russia’s sanctions for another year, until 05 Aug 2016 [1]. A question that always arises concerns the effectiveness of sanctions. The answer to this question however depends on the one hand on the observer’s point of view; on the other hand, one has of course to differentiate between the impact on politics and the effects on economy. A statement as to whether sanctions induce the states affected by them to deliver the desired political actions is, strictly speaking, not possible. After all, no one can say what would have happened had the sanctions not been in force. Such mind games must necessarily remain purely hypothetical. What we can state without any doubt at this time concerning Russia and the Crimea crisis is this: To this day the conflict remains unsolved; Russia has not changed its foreign policy in any substantial way. Politically, the sanctions do not (yet) seem to have had the desired effect. According to a newspaper report, EU sanctions Directive (EU) No. 269/2014 has had nearly no effect, either. This directive imposes travel restrictions on certain persons and stipulates the freezing of the assets of certain natural and legal persons, institutions and organizations. The research done by the European Newspaper Alliance Lena, to which the German daily “Die Welt” belongs, revealed that in at least nine of the 28 EU member states no assets are to be found of persons and organizations named on the EU sanctions list, according to statements made by Spain, Malta, Finland, Croatia, Slovenia, Slovakia, Hungary, Ireland and Lithuania. The amounts in the remaining EU countries were very low, the research paper says [2]. Concerning the effects of the sanctions on economy, however, we’re looking at a different picture. Here, the sanctions do have a significant impact on import and export volumes and are restricting trade severely. On both sides, to be sure, and with the corresponding consequences for suppliers and the transport and logistics sector. Thus, Konstantin Gryshchenko, Lecturer for Funds Markets and Financial Engineering at the RANEPA (The Russian Presidential Academy of National Economy and Public Administration) concludes that the current situation is economically not beneficial, neither for Europe nor for Russia: “The sanctions significantly reduce the goods exchange between Russia and Europe, sometimes even by dozens of percents, and prevent the European economy from coming out of the recession.” [3]. The validity of this assessment can be demonstrated if we take Germany as an example. In the course of the years, German- Russian economy has become extremely intertwined, with Germany growing to be the Russian market’s strategically most important partner. In 2012, the trade volume between Germany and Russia reached approx. 80.5 billion Euros. Due to the Crimea crisis and the ensuing economic sanctions, Germany’s Russian exports decreased in 2014 by 26 percent as compared to the previous year. This also correlates with the export rankings. Thus, Russia is currently only in 13th place (previous year: 11th) on the list of Germany’s most important export partners [4]. Effects of the sanctions on EU states How do the Russian counter-sanctions affect the rest of the EU states? Finland announces the biggest export and import losses. Goods exchange with Russia went back by 11.5 percent (imports) and 13.7 percent (exports) in the first few months of 2015. Lithuania, too, used to deliver a significant Are the sanctions on Russia effective? Recipient in Russia included in the embargo? No Goods included on the Export List Part I A? No Listed dual-use good Yes (Appendix I Dual-Use Goods Directive)? No Goods Appendix II Directive 833/2014 (customs tariff number)? No All other goods Art. 4 II/IV Dual-Use Directive? Yes Yes Yes Yes Military reference or military Yes use? No Recipient included in Yes Appendix IV (Directive 960/2014)? No Permit required Suitable for crude oil transport? No Permit required Military end use? No No permit required Yes Yes 01 Export control (sanctions) / review scheme for goods deliveries Ban Ban Ban Ban No Space and aeronautics? Yes Permit required Source: IHK Region Stuttgart f+h Intralogistics 4/2015 9

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