EU Sanctions Against Russia Under Pressure

By Irina Avdeeva Contributing Writer April 7th, 2017

In December 2016, European Union (EU) member states agreed to extend EU sanctions against Russia until mid-2017. The EU and the United States initially introduced sanctions in response to Russia’s illegal annexation of Crimea and military intervention in east Ukraine in 2014. The Western partners agreed to lift the sanctions if the Kremlin follows its obligations under the Minsk peace agreement from February 2015. The increasing unpopularity of EU sanctions in the European public and among EU politicians puts the future maintenance of sanctions to the test, as EU sanctions’ extension requires unanimity of EU member states. However, keeping EU sanctions despite economic hardships and a potential future US-Russian rapprochement is crucial for upholding the credibility of Western opposition to Russia’s violation of international law.

Public surveys reveal a negative perception of sanctions in several EU member states. This sentiment is shared by some EU politicians due to sanctions’ economic cost and limited impact on violence in east Ukraine. According to Gallup surveys, only 29 percent of Hungarians, about one quarter of Slovaks and Bulgarians, and 11 percent of Greeks, supportthe sanctions. In June 2016, the French Parliament passed a resolution recommending that the French government lift the sanctions.

Contrary to the widespread negative perception of sanctions in several EU countries, the impact of sanctions on the EU’s economy could hardly justify their cancellation. The EU Commission considered sanctions’ impact on the EU economy as relatively limited, and estimated that the EU’s GDP decreased by 0.3 percent in 2014 and 0.4 percent in 2015 (€40 and €50 billion respectively) because of the sanctions.

Public opinion polls show that people’s perception of sanctions in some European countries does not correlate with the sanctions’ true economic impact. A European Parliament report estimates that the annual economic cost has been highest for Eastern European countries and the Baltic States. Nevertheless, majorities in Poland, Lithuania, and Estonia approve of either strengthening or maintaining sanctions against Russia. On the other hand, the Greek population broadly opposes the sanctions, while the estimated impact on the Greek economy has been relatively low. The loudest critics of sanctions are those who do not feel the proximate threat of Russia’s adventurism and shoulder little of the cost. They should not determine the EU’s policy.

The Russian counter-sanctions and food embargo undoubtedly increased the economic costs of Western sanctions for the EU, but did not significantly affect overall EU economic performance. The Russian embargo applies to less than half of the EU’s agricultural exports to Russia. The banned products constituted only 4 percent of all agricultural products the EU exported in 2013. Moreover, with the help of the European Commission, the EU increased exports to the US, Canada, Switzerland, and China. While the EU’s exports to Russia fell by $8.6 billion, the overall exports between 2014 and 2015 increased by more than $49 billion, with most EU countries increasing their exports.

Despite criticism of ineffectiveness, Western sanctions have severely hurt various sectors of the Russian economy. In combination with low oil prices, the sanctions led to a decrease of 1.5 percent and 3.7 percent in Russia’s GDP in 2014 and 2015 respectively. The Russian financial sector suffered a large capital outflow, losing an estimated US$153 billion in 2014. Russia’s defense sector has been largely cut off from access to Western technology and cannot substitute for imports, as Russia’s domestic defense technology suffers from low quality and high costs.

Economic pressure from sanctions has also most likely influenced the developments in the Ukrainian conflict. Although the violence in east Ukraine continues, Russia’s expansionism has not affected other countries in Eastern Europe, as feared by Poland and the Baltic States. The precise role of Western sanctions in preventing the deterioration of the Ukrainian conflict remains unclear. However, sanctions demonstrate to the Kremlin the willingness of the West to use drastic measures to counteract Russia’s aggression. Moreover, sanctions have made Russia’s expansionism more expensive and have shown Moscow that any further escalation of the conflict in Ukraine would be costly.

With Washington’s course towards Moscow changing, the EU needs to show more confidence approaching Russia. A new thaw in US-Russian relations might significantly change US policy towards the Ukrainian conflict, with the future of US sanctions against Russia being “under consideration” in the White House. However, even after losing a crucial partner in countering Russia, EU politicians should stay committed to sanctions to enforce Russia’s compliance with the Minsk agreement. Because the EU is Russia’s most important trading partner, EU sanctions would remain effective and keep Russia under economic pressure even without US participation.

Maintaining EU sanctions and resisting pressure to reshape EU policy towards Russia after a US-Russian rapprochement would enable the EU to strengthen its own credibility and protect the principles of international law and state sovereignty. In contrast, by lifting the sanctions, the EU would send a false message to the Kremlin, encouraging Moscow to continue pursuing its expansionist politics.

The EU policy toolkit lacks any adequate alternatives to sanctions that would allow the EU to contain Russia’s aggressive policies. A comprehensive political and economic rapprochement with Moscow will not reduce Russia’s expansionism, as Moscow is firmly committed to restoring Russia’s sphere of influence in the region and worldwide. Only harsh and decisive measures like sanctions will restrain Russia’s ambitions. The relatively low economic costs of the sanctions are a price EU member states need to pay to strengthen European security.
Taking on a leading role in countering Russia will be challenging for the EU in light of rising populism, economic hardships, and failure to deal with the refugee crisis. However, the challenge can become an opportunity for the EU to strengthen the unity of its member states on the basis of shared values of freedom, democracy, and respect towards human rights and international law.