Sanctions on Technology Imports Leave Russia Playing Catch Up
Published: August 4, 2014 (Issue # 1822)
The impact of the EU's latest and harshest sanctions on Russia will be felt most keenly in the country's economic sectors that are largely dependent on state-of-the-art Western technology, ranging from the extraction of hydrocarbons to civil aircraft production, analysts said.
The European Union late last week officially approved new measures aimed at pressuring Russia into changing its approach to the crisis in Ukraine. The sanctions target Russian state-owned banks, which will have trouble attracting long-term financing abroad, and ban EU exports of military products and dual-use technology to Russia. EU deliveries of equipment and technology for oil exploration in the Arctic and shale oil projects in Russia have also been blocked.
Of the various measures imposed by the EU, the most significant are the restrictions on Russian imports of equipment and technology related to the oil industry, said David Cadier, a fellow at International Strategy and Diplomacy at the Department of International Relations of the London School of Economics and Political Science.
"This restriction is probably one of the most important for Russia as it might prevent it from exploiting some resources, in the Arctic for instance," Cadier said Friday. "By contrast, the freeze on five Russian banks from the European capital market is unlikely to have a major effect in the short term as Russia has sufficient reserves."
Most of the state-owned banks have already shrugged off the sanctions, saying they have enough capital of their own to continue operating without any disruptions. Also, Russia's Central Bank has said it will support the banks should the need arise.
The ban on EU exports of oil technology and equipment, Cadier said, is significant because of what it reveals about the crisis in Ukraine and about the state of EU-Russia relations in a broader sense.
"Contrary to the ban on military equipment for instance, these sanctions are not directly linked to the [military situation in Ukraine] that prompted them, but constitute a wider attempt to put pressure on Russia. This indicates that the level of antagonism between the EU and Russia has moved to a new level," Cadier said.
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