New sanctions against Russia are not good for Irish exporters

As Micheál Martin and other EU leaders consider tougher sanctions to be imposed on Russian President Vladimir Putin for deploying large numbers of troops to the Ukrainian border following their pre-Christmas summit, Irish exporters are worried about the loss of 1.5 billion euros in sales on the Russian market. since sanctions were imposed in 2014.

Germany’s new Defense Minister Christine Lambrecht commented caustically after the EU summit to German media, saying Mr Putin should personally feel the consequences of his actions and no longer be allowed to shop on the Champs Elysées in Paris.

A more sober response is needed from the EU, and lessons must be learned from the sanctions that were imposed in 2014 when Russia invaded Ukraine and then annexed Crimea. The Russian prime minister responded with counter-sanctions, including a total ban on food imports from EU countries as well as the United States.

The effect on Irish food exporters to the region has been devastating, with companies such as ABP – Ireland’s largest beef exporter – and Ornua, the Kerrygold butter exporter, then sidelined. that years of investing to establish a market presence were wiped out overnight.

Total Irish exports to Russia collapsed by more than 50% in the following years and a total loss in export sales of food products was noted.

Paradoxically, Irish imports from Russia more than doubled during the period. Growing volumes of fertilizers, animal feed, wood pulp and railway ties, aluminum, steel, salt and petroleum oils have added to the growing list of goods. imported.

A similar trend is evident in the EU where imports from Russia increased by 59% in the 10 months to October and imports to the United States have now returned to pre-invasion levels.

The cold reality is that the sanctions against Russia following the annexation of Crimea have not been effective and have not changed the ambitions of the Putin administration in Eastern Europe.

Russia continues to be one of the world’s largest economies; 11th in terms of GDP in 2020, with global exports of 302 billion euros and imports of 208 billion euros and its figures are rapidly recovering from the pandemic, with foreign trade up 34% year-on-year in first half of 2021, despite the current EU sanctions extending until January of next year.

The statement released by EU leaders at the end of their summit on December 17, while firm, made no mention of any specific sanctions, stating only that they would impose new economic sanctions on Russia – in tandem with the United States. United and Britain – if Russia’s army invaded Ukraine. However, they encouraged more diplomacy with Moscow.

Although no new sanctions were agreed at the summit, diplomats said new measures could include targeting Russian oligarchs, banning EU transactions with Russian private banks and possibly removing all the Russian banks in the SWIFT network – or the Society for Worldwide Interbank Financial Telecommunication, to give it its full name – it is the cornerstone of international money transfers.

European Commission President Ursula von der Leyen, second from right, chats with Czech Prime Minister Andrej Babis, second from left, during a roundtable discussion at a recent EU summit in Brussels on on Russia’s military threat against neighboring Ukraine. Photo credit: Olivier Hoslet

However, these are very similar to the sanctions imposed in 2014, which had little real effect.

The Biden administration is pushing EU allies to finalize a broad package of sanctions against Russia, but early Commission leaks have indicated they are likely to be focused on banks and energy companies.

The United States believes that an agreement on specific and severe joint sanctions would send a strong signal to the Russian president, which could ensure that he withdraws his troops from the Ukrainian border. Western officials say the Russian reinforcement could be completed early next year, making an assault possible as early as late January.

However, it is not clear whether these banking and energy sanctions, or other economic measures, would deter Putin from attacking Ukraine if he continues to consider expanding NATO’s military network through Eastern Europe – especially in Ukraine – as an existential threat to Russia’s Security.

The final details of the sanctions proposals remain to be worked out, and EU officials are still assessing the potential economic and legal impact the measures could have on key goods, services and individuals.

It is necessary that the Taoiseach Micheál Martin and officials from the Department of Trade and Business Employment make a strong case for Irish exporters, who have lost around € 1.5 billion in export sales to the region since the imposition of sanctions in 2014. is well out of proportion with the economic damage suffered by the United States and the EU, based on international studies on the per capita cost of sanctions.

Other EU countries, like Germany, which depend heavily on Russia for energy and other products, will try to tailor the sanctions to their own economies as best they can. The United States also pushed Germany to agree to shut down the Nord Stream 2 pipeline from Russia in the event of an invasion. Currently, 40% of Europe’s gas supply comes from Russia.

The United States also pushed Germany to agree to shut down the Nord Stream 2 pipeline from Russia in the event of an invasion.  File photo: AP / Sergei Chuzavkov
The United States also pushed Germany to agree to shut down the Nord Stream 2 pipeline from Russia in the event of an invasion. File photo: AP / Sergei Chuzavkov

The United States and the great countries of Western Europe, together, are trying to strike a balance between giving the impression that they will follow through on their threats while maintaining a diplomatic dialogue.

Berlin will hesitate to risk a cut in supplies of Russian natural gas, on which it is highly dependent for its businesses as well as its households in winter, by standing up to Moscow.

And, Dublin will be caught between balancing any further damage to its food and other commodity exports, while trying to be seen as good Europeans, as well as keeping up with the Biden administration. The big unknown, of course, is Mr. Putin’s reaction to any European and American sanctions.

Diplomats close to the negotiations expect Russian retaliation with a ban on imports of a wider range of products than before. This could delay any return to the market for the Irish beef and dairy industry, which is gearing up for the introduction of Brexit tariffs on shipments to the UK next year, and would welcome more market options.

There are also fears that new sanctions will be extended by the Kremlin to imports of pharmaceuticals and computer components, thus hampering the lucrative trade in these products in Ireland.

There is a range of sensitivities in EU member states as well as the UK, which has also pledged to apply the sanctions. Those closer to Russia are energy dependent, those further west have more general trade concerns.

There is, without a doubt, a need for the EU to project a united front, to warn Russia of the serious consequences if it invades Ukraine, but it will be difficult to find the right balance.

To reassure NATO allies in Eastern Europe, who fear being left open to an invasion, the United States is promising additional military deployments and security assistance in the event of a Russian attack. The Kremlin denies the West’s accusations against it, including any plans to invade Ukraine.

He claims to have legitimate security interests in the region and has delivered proposals to the United States demanding assurances that NATO will not expand or install military support structures across Eastern Europe. and the Balkans.

The top Republican on the US Senate Foreign Relations Committee said that the security proposals Moscow has put forward in response to Western alarm about a build-up of Russian troops near Ukraine are a clear sign that Russia ” try to create a pretext for war ”.

  • John Whelan is a leading expert on foreign trade

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