Should the US lift sanctions against Russia?

Russia sanctions: maintain toughness or give in?

It was one of those appointments in the Berlin political scene that was a bit surprising at first. The left member of the Bundestag Klaus Ernst had invited to a discussion round together with the Eastern Committee of the German Economy. The Left Party and an employers' association? Their respective interests are very rarely congruent. It is different with the issue of Russia sanctions. Both sides would rather get rid of them today than tomorrow.

The sanctions are the "wrong medicine", says Klaus Ernst. Even after five years they would not have changed the Russian position. "So how much longer do we want to do this. Will it be different in three or four years? I don't think so." At the same time, however, the sanctions would have a particularly negative impact on German companies. Of all the sanctioning states, Germany has to bear the greatest burden, says Ernst, who is chairman of the economic committee in the Bundestag.

$ 5.6 billion in losses per month

A thesis confirmed by the economist Julian Hinz from the Kiel Institute for the World Economy. Hinz calculates that the global trade loss due to the sanctions by the end of 2018 - this is how far the data currently goes - will amount to around 300 billion US dollars, i.e. 5.6 billion dollars per month. 60 percent of this would be borne by the Russian side, which corresponds to almost seven to eight percent of Russian exports. On the part of the sanctioning states, Germany accounts for the largest trade losses: 770 million US dollars a month.

What Hinz also says: The minus is only in the slightest part a direct consequence of the sanctions. Only 13 percent of EU trade losses were incurred because certain goods were no longer allowed to be exported from Europe to Russia, or because the Kremlin, in return, cut the import of agricultural products from the EU. The biggest problem is the uncertainty - fueled by the sanctions that the US has imposed on Russia.

Better be careful

They are so-called extraterritorial sanctions, which means that those who do not adhere to the US guidelines for Russia run the risk of being punished in the USA. This also applies to Europeans. It is important to weigh up. Michael Harms, the chairman of the Eastern Committee of German Business, describes the case of a German medical technology company. The company management wanted to set up a joint venture with a Russian partner. That would have had a monopoly position - a very lucrative business.

Under Trump, the US is taking a tough line towards Russia

However, a sanctioned oligarch was involved in the Russian company, "across three corners," as Harms says. "The company told me quite frankly that out of consideration for their US business they are refraining from doing business in Russia because they did not want to take on these reputational risks."

Read and examine

The global US list of "Specially Designated Nationals and Blocked Persons" has now grown to 1,000 pages and 25,000 people, says Harms. 140 pages would concern Russia. The Eastern Committee estimates that the oligarchs who were additionally sanctioned by the USA in April 2018 and their family members are involved in an estimated 8,000 companies worldwide. "Theoretically, if you do business with a Russian company, you would have to check every time whether these sanctioned persons do not hold more than 50 percent of this company.

However, Russia is also sealing off its economy more and more. The sanctions have accelerated the trend towards protectionism, says Harms. Many German companies from the fields of mechanical engineering, energy, software and medical technology are affected. "There access for foreign companies is restricted, we see that very clearly for German companies."

The applications pile up

If a deal is nevertheless concluded, the German side must apply for an export permit for many goods and services from the Federal Office of Economics and Export Control (BAFA). It currently takes six to twelve months for this to be available. The Federal Ministry of Economics is often also involved. "Some say there are 4,200 applications on their desks, others report 1,000," reports CSU MP and former Federal Transport Minister Peter Ramsauer. "In any case, the applications are piling up and you shouldn't be surprised at the turnaround times."

Long waiting times at export controls mean that many business deals are busted

In a European comparison, Germany is much too cautious and also too strict. "Other countries are more subtle at complying with sanctions without harming the economy as we do." The CSU has long been pushing for the sanctions to be phased out. Ramsauer calls for more political flexibility. "That means not first implementing 100 percent of the Minsk Agreement before we reduce the sanctions."

New ideas are needed

Ramsauer is not alone in Berlin with this opinion. However, it is noticeable that it is usually only economic politicians who think this way. The SPD politician Bernd Westphal, who is the economic policy spokesman for his parliamentary group, also conceded this in the discussion round initiated by Klaus Ernst and the Eastern Committee. "Foreign politicians see it a little differently." However, such a rigid stance is no longer appropriate. In the 21st century, with a view to peace in Europe, one should "come up with more ideas than sanctions, isolation, armament".

Russia and Ukraine exchanged prisoners in early September

It is also up to Germany to get the blockade moving. Something is moving on the Russian side. "Prisoners have now been exchanged, one is getting closer." After five years of sanctions, it is time to focus more on your own interests. Westphal's suggestion: "We'll take the first step now and see how the Russian side behaves."

How much influence does Germany have in the EU?

"I think we should take the opportunity to work with the French president to give an impetus," the SPD politician demands. Chancellor Angela Merkel and Emmanuel Macron should put the issue on the European agenda. By 2020 at the latest, when Germany takes over the EU Council Presidency in the second half of the year.

But Chancellor Angela Merkel does not want to know anything about that. The punitive measures could only end "when Crimea returns to Ukraine," she said last June when Ukrainian President Volodymyr Selenskyj visited Berlin. Your guest added that sanctions are the only way to end the conflict without bloodshed. Those in Germany who are calling for the punitive measures to be lifted are invited to go to Ukraine and see for themselves.