Ulrike Reisner
European Union:
The Destructive Work
of Sanctions
  • Ulrike Reisner
    Political scientist, Vienna, Austria
  • The economic outlook for Europe's economy is devastating. Numerous companies are under massive pressure to withdraw from Russia. American elite universities like Yale and Stanford are at the forefront. Under the pretext of "science", they are preparing the ground for an economic raid in Europe.

    For critical listeners, the words of the head of the International Monetary Fund (IMF), Kristalina Georgieva at the World Economic Forum in Davos were almost cynical. She said with regard to Germany that the IMF would raise its forecast to growth of up to 0.5 per cent; in October it had still predicted a minus of 0.3 per cent. One could also call cynical the words of the president of the European Central Bank, Christine Lagarde, who went on record saying that 2022 had been a "strange, strange year". The anecdote Ms Georgieva told at the podium also seems cynical: "Two men are being chased by a bear in the forest. Suddenly, one of them takes sneakers out of his backpack. The other asks him why he is doing this, whether he really thinks he is faster than the bear with sneakers. No, he replies, but it's not about being faster than the bear. It's about being faster than your friend.". In the climate crisis, we all need sneakers," Georgieva said.
Sound trade relations are damaged

Enough words, let's get back to facts. The European Commission's November 2022 forecast was as follows: "In view of high uncertainty, high energy price pressures, erosion of household purchasing power, a weaker external environment and tighter financing conditions, the EU, the euro area and most Member States are expected to slide into recession in the last quarter of the year (2022, note).(...) As inflation continues to erode household disposable income, the slowdown in economic activity is expected to continue in the first quarter of 2023. Growth is expected to return to Europe in the spring as inflation gradually loosens its grip on the economy. However, with strong headwinds still holding back demand, economic activity is expected to be subdued, with overall GDP growth reaching 0.3 per cent in 2023 in both the EU and the euro area."

The EU is in an economic crisis. This crisis is largely self-inflicted, with international financial institutions playing their part. Therefore, the above statements are cynical. They drive the wedge between the EU and Russia deeper and increase the damage to these economies.

Let us recall the time before the Corona pandemic:

- Russia was the EU's fifth largest trading partner in 2019 in terms of exports, at 4.1%, and its fourth largest trading partner in terms of imports, at 7%.

- The EU was Russia's largest trading partner for both exports and imports. In 2019, Russia's imports from the EU accounted for 35% of total imports, up from 39% before the sanctions of 2014. The share of exports to the EU was 42%, up from 50% in 2012.

- Energy accounts for the largest share of EU imports from Russia. In 2019, 26% of oil and oil products imports, 38% of gas imports and over 40% of coal imports came from Russia. Other raw materials such as iron/steel, nickel and aluminium and wood were also exported to the EU.

- A large share of EU exports to Russia were machinery, vehicles and other products in the transport sector, pharmaceutical and chemical products and other industrial goods.

- The EU is by far the largest investor in Russia, with 75% of foreign investment in Russia coming from EU countries in 2018.

The EU sanctions packages have dealt a heavy blow to their economies. This is critical because the member states' economies are already under pressure from the Corona pandemic and the associated state intervention. The list of goods sanctioned for export from the EU to Russia is long: cutting-edge technology, certain types of machinery and transportation equipment, specific goods and technology needed for oil refining, energy industry equipment, technology and services, aviation and space industry goods and technology, maritime navigation goods and radio communication technology, a number of dual-use goods, such as drones and software for drones or encryption devices, luxury goods, civilian firearms and other army materiel.

The list of sanctioned products for import from Russia includes among others: crude oil and refined petroleum products (from February 2023), with limited exceptions, coal and other solid fossil fuels, steel, steel products and iron, gold, including jewellery, cement, wood, paper and plastics, seafood and liquor (e.g. caviar, vodka), cigarettes and cosmetics.

However, it is not only industrial companies that are harmed by the sanctions against Russia; service providers are also massively hampered in their business. In this regard, the Commission writes : "Since 4 June 2022, it has been prohibited to provide, directly or indirectly, accounting, auditing (including statutory audits), bookkeeping and tax consulting services, as well as business and management consulting or public relations services. Lobbying services could constitute public relations services and therefore fall under the prohibition. To reinforce the pressure on Russia's industrial capacity even further, in October 2022 the EU decided to widen the scope of services which can no longer be provided to Russia, by including IT consultancy, legal advice, architecture and engineering services. A ban on the provision of EU advertising, market research and public opinion polling services, as well as product testing and technical inspection services, was added in December 2022."
Photo by Rob Lambert on Unsplash
Hunting for companies in Russia

The following example is intended to illustrate what this means in practice for internationally active companies: The Austrian Raiffeisen Bank International is under pressure - less economically than morally. Although the bank has slowed down new business with customers in the Russian Federation since February 2022, it has not withdrawn from the Russian market. A strong rouble and high interest rates have enabled Raiffeisen to make a profit of €1.4 billion between January and September 2022, half of the group's profits. However, Raiffeisen is currently unable to access this money due to Russian counter-sanctions.

The pressure is now mounting, as the chairman of the board, Johann Strobl, and the managing director, Andreas Gschwenter, are listed on the Ukrainian website "War & Sanctions" under the heading "awaiting sanctions". The main sponsors of the site, the Ukrainian Foreign Ministry and the National Anti-Corruption Agency of Ukraine (NAZK), are therefore clearly recommending sanctions against the two businessmen.[1], [2]

The main goal of "War & Sanctions" is "to inform foreign governments and the general public about the sanctions that have already been imposed on Russia and to call for expanding sanctions against those who support the war. This can ensure maximum pressure on the war accomplices and bring the victory of Ukraine closer."

In this context, the public is called upon to actively participate in the hunt: "The Portal allows users to see which countries have not yet imposed sanctions on a specific person, regardless of the fact that he or she is already under sanctions in other states. This will help to synchronize sanctions lists more quickly and limit opportunities to circumvent sanctions."

Officially, the platform operators commit to cooperate with the International Working Group on Russian Sanctions of the Freeman Spogli Institute for International Studies at Stanford University, and in particular with the Yermak-McFaul Expert Group. The expert group was established at the initiative of the President of Ukraine, Volodymyr Zelensky. It is headed by the head of the Ukrainian presidential office, Andrii Yermak, and the director of the Freeman Spogli Institute for International Studies (FSI), Michael McFaul.

In addition to Michael McFaul, Jeffrey Sonnenfeld is particularly active in the United States in tracking down possible Russian supporters in the international economy. The founder of the Chief Executive Leadership Institute at the Yale School of Management has been observing well over 1,200 companies since February 2022, according to his own indications.

Sonnenfeld boasts that he has made a significant contribution to the economic war against Russia: "Our list has already garnered extensive coverage for its role in helping catalyze the mass corporate exodus from Russia." Of the 226 current international companies that - according to Sonnenfeld's observations - stubbornly refuse to leave Russia, there are only 25 US-American companies! Apart from 41 Chinese companies, almost half of the companies (103) are based in the EU: 25 from France, 19 from Germany, 12 each from Italy and Austria, 7 from Slovenia, 6 from Greece, 5 each from Spain and Hungary, 4 from the Netherlands, 2 from Luxembourg and 1 each from Belgium, the Czech Republic, Latvia, Poland, Portugal and Cyprus.

However, this list only concerns one part of the observed companies that are accused of "defying demands for exit or reduction of activities". Many companies from the EU are found in other lists because they are "postponing future planned investment/development/marketing while continuing substantive business..." or just "scaling back some significant business operations but continuing some others".

Let us recall that the EU elites have granted Ukraine the status of a candidate for membership.

Let us recall that US-American think tanks like the US Council on Foreign Relations are publicly calling for immediate access to the EU's internal market in order to support the country's economy.

Let us also recall the official motto of the Yale School of Management: "Novus Ordo Seclorum". It is one of the two Latin currencies on the back of the US seal and on the back of the dollar note.

This brings us full circle: the United States is waging an economic war in and against Europe and Russia. The damage is already enormous - not only on the economic level.
Energy Crisis: The Struggle for Scarce Resources
Climate change and the Ukraine conflict are being used as a pretext to declare a state of energy emergency in the European Union. This time, Europe is paying with inflation, recession, creeping expropriation and impoverishment. However, it is more about securing the energy needs of the technostructure so that it can further develop its instruments of domination.
Cover photo: CSCR