Europe’s Russian connections
Aasim M. Husain, Anna Ilyina, Li Zeng 29 August 2014
The conflict in Ukraine and the sanctions against Russia have already affected the Russian financial markets. This column discusses the repercussions for the rest of Europe of possible disruptions in the trade and financial flows with Russia. Eastern European countries could be seriously affected by a slowdown in the Russian economy due to their close links with Russia. Western countries – despite having looser links with it – could also experience significant effects.
The conflict in Ukraine and the imposition of new sanctions against Russia by the US and the EU (second half of July) followed by Russia's counter-sanctions (August 7) signal an escalation of geopolitical tensions that has been strongly felt in Russian financial markets (see Chart 1). A deterioration in the conflict, as well as further escalation of sanctions and counter-sanctions, could have a substantial adverse impact on the Russian economy through direct and indirect (confidence) channels (IMF 2014a).
Europe's nations and regions Politics and economics
Russia, sanctions, Eastern Europe
Russia’s tit for tat
Peter A.G. van Bergeijk 25 April 2014
In reaction to the Crimean crisis, the EU imposed certain sanctions on Russia. Russia responded by blacklisting EU and US officials. This column discusses the comparative vulnerability of the EU and Russia amid this tit for tat pattern. In purely economic terms, the EU is in a much better position than Russia. However, political regimes also matter. The autocracy score for Russia dampens the impact that the economic sanctions would have politically. The democratic nature of the European governments would translate the sanctions imposed by Russia into great political pressure for the EU. This makes the Russian tit for tat threat realistic.
Since 16 March 2014, the EU (in concerted action with the US) has frozen assets and imposed travel bans on 33 persons and an individual bank. On 20 March, Russia counteracted with the reciprocal blacklisting of EU and US officials. This pattern of tit for tat raises the question of the comparative vulnerability of the EU and Russia. In assessing this vulnerability, is not just the ability to inflict economic damage that matters, however, but also the way economic damage translates into political change. This means that one needs to consider the political system.
Politics and economics
Russia, EU, sanctions, Crimean crisis