Economic Sanctions Against Russia a Double-Edged Sword – Russian Lawmakers

23 Mar

March 13, 2014


Unilateral US sanctions against Russia might hurt other world economy players, Russian lawmakers warned on Wednesday. On Monday, the US House of Representatives passed a resolution denouncing Russia’s actions with respect to Ukraine. The resolution has only recommendatory status

“You should understand that any state in the world economy is fitted into a system of close world economic ties,” head of the Committee on Economic Policy of the State Duma lower house of Russia’s parliament Igor Rudensky told reporters.

“Any ill-considered move could result in unpredictable consequences and boomerang back to the initiator,” said Rudensky. “Economic sanctions are a double-edged sword, and Western states should handle it very carefully”.

He noted the position of European and US business communities that had urged authorities to avoid unilateral sanctions against Russia as it would negatively impact the world economic situation in general and competitive environment in particular.

Meanwhile, Rudensky did not rule out that “possible use of economic sanctions in connection with the Ukrainian situation will bring Russians together in the solution of not only political, but also economic issues, contributing to the development of a self-sufficient national economy”.

For his part, head of the parliament committee on security Irina Yarovaya called US threats none other than “the wish to foil the legitimate activities of Russian officials related to securing the sovereign rights of our country and its citizens, as well as ensuring security”.

The resolution by US government urges the US president and leaders of democratic countries not to attend the G8 summit in Sochi and to consider expelling Russia from the group.

It also asks the White House administration to work closely with European allies and other states on introducing visa, financial, trade and other sanctions against high-ranking Russian officials and state-owned banks and companies.

US firms are warning Obama that they will suffer huge economic losses should sanctions be imposed on Russia. These groups have cautioned Congress along with the Obama Administration that unilateral action executed by the US would put tens of billions of dollars of US trade and investment in jeopardy.

Business officials claim that they have been caught in the middle of the swift-moving US foreign policy and their interests in a market so many have been keeping their eyes on, with energy being the most important sector to watch. Huge corporations like PepsiCo and General Electric, among others have verbally made clear that their interest and involvement in Russia is key to their global strategic plan.

In all actuality, it seems that aggressive investing has paid off for one company, with PepsiCo earing $4.8 billion in the country during 2012. The company has become the largest food and beverage provider in the Russian Federation. General Electric has partnered with two Russian companies to create gas turbines in Rybinsk. Even Boeing, a top aerospace company, is one of the top US exporters to Russia.

Relations like these will be in jeopardy should the crisis escalate or if the Obama Administration promises slowly but steadily to make it more difficult for Russia’s economy to flourish. “What we’ve been hearing from our members is a lot of concern that there are two ways America gets hurt in a game like this. One is by American sanctions that put them out of business, and the other is by Russian retaliation, regardless of what we do,” said William Reinsch, president of the National Foreign Trade Council, according to a Washington Post article.

During closed door meetings with Congressional members and the Obama Administration, “we have not been shy about telling them, if it is not multilateral, it is not going to work,” Reinsch said, according to The Washington Post. Business groups have reacted as officials in the White House and politicians consider the possibility of using economic levers in an attempt to reverse Russia’s steps into Ukraine.

In an initial move, the White House froze assets and denied visas to a selection of Russian officials. The Foreign Affairs Committee also gave the green light to a nonbinding resolution which condemns Russia’s movement in Ukraine and requests sanctions to be imposed on top level Russian officials, state-owned financial institutions, and other state organizations.

The resolution requests that America pushes for an increase in natural gas exports to make their way to Ukraine. That method is seen as a way to help Ukraine break away from Russia as its main gas supplier. Not surprisingly, this has captured the attention of conservationists and US businesses who rely on the cheap fuel supply, and are in opposition to the export idea.

It is believed that sometime this week, the Senate Foreign Relations Committee plans to think up its own Ukraine legislation, according to Senator Democrat representing New Jersey Robert Menendez, who leads the panel.

Ex-US ambassador to Moscow Michael McFaul noted several corporations would be left in a vulnerable state if sanctions were brought into play. According to the Washington Post, McFaul said for Severstal, “a well-respected [Russian] steel company with lots of investments in the US and Europe, this can’t be good news for you.” He also mentioned that Exxon Mobil “has just signed up for what would be the biggest venture in the history of capitalism” with Russia’s Rosneft and said the firm has “got to be very nervous.” However, McFaul did make it clear that, “having said all that, I also think that Putin will be ready to make those economic sacrifices if he wants to go forward with this annexation strategy”.

For US companies, Russia is a vital country in their global business strategies. “If we are unable to expand our businesses in emerging and developing markets…as a result of our investments, particularly in Russia, as a result of economic and political conditions …our financial performance could be adversely affected,” PepsiCo said in its 2012 annual report.

Reprinted from The Voice of Russia.

Copyright © 2014 The Voice of Russia

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