New US and European sanctions against Russia: content and ramifications

The House of representatives received an overwhelming vote in favor of the new sanctions against Russia. The Senate, that initiated the bill is likely to support it.

On 25 July, the House voted for new sanctions against Russia, North Korea and Iran, with the sanctions not being able to be changed or softened by the president without congressional support. After the formal Senate voting, the bill is to be signed by President Trump.

According to the bill, the Treasury Secretary, the Secretary of State and the National Intelligence Director are to produce an annual report on businesses close to Vladimir Putin and the Russian state, describing their influence on the national economy. Also, foreign companies, including European ones, can be fined for cooperating with Russia, in particular regarding gas-related construction projects. The credit period for the Russian gas and oil companies will be cut from 90 to 60 days.

New EU sanctions also followed on 26 July, caused by the illegal shipping of four Siemens-produced turbines to the annexed Crimea.

The German producer claims the turbines were meant for the Krasnodar region, according to the Tehpromexport contract, but were shipped to Crimea in a breach of sanctions, threatening the company with huge fines.

Reuters reported earlier that it`s likely to be the Energy Ministry officials and the employees of the company, who shipped the turbines to the peninsula.

US-Russian relations worsened in autumn 2014 after Russia had annexed Crimea and started a war in the south-east of Ukraine. The US and the EU have imposed sanctions against several Russian and Crimean officials, including the former Ukrainian president Yanukovich, Russian presidential aides Surkov and Glaziev, the head of Crimea Aksenov and others. They were banned from entering the US and the EU, with their assets frozen.

The American and European sanctions were toughened in the months that followed. By mid-July 2015, the US sanctions list included 44 persons, including a businessmen close to president Putin – Igor Sechin, Yuri Kovalchuk, Gennady Timchenko and the Rotenberg brothers. Some Russian companies have also been sanctioned: RossiyaBamk, called by the American authorities “the personal bank of the high ranking Russian officials”, Gennady Timchenko`s Volga Group and the state-controlled Rosneft, Vnesheconombank and Gazprombank.

At the time, the EU list included 72 individuals which included the same key figures.

On 17 July 2014, a Malaysian Boeing was shot down over the Donetsk region killing 298.

The US Secretary of State John Kerry promptly blamed Russia for supporting the separatists who controlled the territory, with new sanctions afterwards.

Six months following the incident, the European parliament added new individuals and companies to the sanctions list, including major Russian banks Sberbank, VTB and Rosselkhozbank. The European companies were banned from investing into Russia’s infrastructural, transport, communications and energy projects.

The EU list of 146 individuals and 37 companies has not been changed since mid-February 2015.

The sanctions imposed by America have constantly been renewed. By September 2014, RBC reported that the sanctions affected more than 90% of the oil industry and almost the entire gas extraction sector. All the major companies – Lukoil, Gazprom, Transneft, Gazprom neft, Surgutneftegaz, Novatek found themselves sanctioned, as well as the leading arms producers.

Military technology and service export to Russia has also been banned.

Then the latest sanctions followed, with the ban to defy them by sole presidential power.

The ramifications for the national economy are likely to be extremely serious – former Russian deputy Energy Minister Vladimir Milov believes, as reported by RBC.

The most serious challenge will be the lack of Western credits, which helped the Russian economy to survive the 2008-2009 crisis, when debts rose from USD 360 billion to 660 billion. It is now USD 470 billion, with no alternative sources to fill the gap, Milov claims.