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Russia plans sanctions protection, European businesses complain of being 'sacrificed'

Russia plans sanctions protection, European businesses complain of being 'sacrificed'
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The Kremlin says it planning “long-term” measures to protect Russia from Western sanctions imposed over the Ukraine crisis – without saying what those will be.

Foreign Minister Sergei Lavrov told European Business Association members in Moscow – who are caught in the middle of the row – that the sanctions are unlawful.

He said it is the moment of truth for the EU and Russia: “The relations between Russia and the European Union have reached a reckoning point when the decision should be taken about the direction of our interaction in the future. When we should answer the question whether we are strategic partners for each other, or whether we still remain geopolitical competitors.”

On the sanctions, Lavrov said: “We don’t know who is losing out more: Russia or the European Union.”

He quoted European Commission figures from earlier in the year that the cost to the EU could be 40 billion euros this year and 50 billion euros next year.

But Russia’s currency and economy are also under pressure

The Kremlin’s tit-for-tat ban on food imports from countries that have imposed sanctions has driven up prices in Russian shops and pushed inflation there to eight percent last month.

Falling oil prices are another problem for Moscow. Russia is heavily reliant on earnings from energy.

It needs crude to sell for around 104 dollars a barrel to cover all its budget commitments next year. Right now the price is around $20 a barrel below that and shows no sign of rising.

European businesses being ‘sacrificed’

European companies in Russia have warned they are being hurt by a Russian embargo on food imports as well as EU sanctions and risked being “sacrificed” in the standoff over Ukraine.

In comments before Lavrov’s speech, the chairman of the Association of European Businesses in Russia (AEB) criticised the EU but also said Russia’s actions violated World Trade Organisation rules.

The remarks by Frenchman Philippe Pegorier underlined the growing problems for the more than 600 European companies in his group as sanctions bite, the economy stagnates, the rouble slides and competition from Asian firms grows.

“Minister, the European business community … is angry, angry that it is being sacrificed by both the European and Russian authorities,” Pegorier said in introductory remarks to business chiefs in a Moscow hotel, with Lavrov at his side.

“The new sanctions hurt … and create uncertainty for investment in Russia,” he said, urging European leaders to help do more to resolve the crisis in Ukraine. But he added: “The Russian regulations also hurt our companies and do not meet Russia’s commitments to the WTO.”

Moscow’s response to sanctions by banning some Western food imports and trying to replace sanctioned items with Russian goods, combined with its attempts to drum up new business with Asia, pose a threat to European businesses in Russia, he said.

The AEB has repeatedly criticised the sanctions, imposed over Russia’s annexation of Crimea and backing for separatists in eastern Ukraine, but has been less forthright in expressing concern over the impact of the Russian government’s policies.

with Reuters

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