The EU’s discussion about expanding sanctions into Russia is disturbing parts of the EU as it could affect trade…
Germany gets a third of its oil and gas from Russia and accounts for almost a third for all the EU’s exports to Russia. Russia buys Volkswagens, BMWs, and Audis among other German goods resulting in German exports being worth 13 billion Euros in 2013.
Volker Treier, deputy head of Association of German Chambers of Commerce and Industry said: “Every third job in Germany depends on exports. The interruption of German-Russian trade could affect 300,000 jobs. There are many companies that have made enormous investments in Russia. Do they now have to pay for a political conflict?”
Russian trade embargos will be felt the hardest by small to mid-sized businesses in Germany. The majority of the 6,300 German companies active on the Russian market are small to mid-sized enterprises and one in four of these companies would feel the restrictions.
Britain has been the more outspoken in favour of the trade sanctions. Only 2.5% of Russian imports come from Britain, much less than Germany, Italy or France – some might say an easier case for the Brits to call for more sanctions. A third of all British exports to Russia were cars – these exports being worth £1.6 billion. Other exports include education, pharmaceuticals, consumer goods and chemicals.
If the sanctions go ahead it would hurt the British financial sector the most – Russian companies are well represented on the London Stock Exchange.
UK Trade and Investment said, “We have helped Moscow realise its ambitions to becoming a international financial centre.”.
In a bid to improve Italy’s slow performing economy the government has been pushing for foreign investments, particularly in Russia, so new trade sanctions would not do Italy any good.
Luxury Italian brands sell well in Russia. Russian holiday makers enjoy vacations to the Italian Riviera. Russia’s private equity investment fund and Italy’s strategic investment fund have agreed a deal to invest 1 billion Euros in to companies and projects in the two countries. Italy is Russia’s third biggest trade partner and in 2011 trade reached 27 billion Euros. Italian exports to Russia mainly consist of mechanical products, textiles, leather and furniture. On the flip side, Russia is Italy’s main supplier of energy. 15% of oil and 30% of gas imports come from Russia and the steel sectors in Italy rely largely on direct investments in Russia.
The head of Russia’s biggest oil company, Rosneft, said “If Europe and the United States isolate Russia, Moscow will look East for new business, energy deals, military contracts and political alliances”.
The support of Beijing is fundamental for Russia. Not only is China a fellow member of the U.N. Security Council, it is also the world’s second biggest economy.
Investors, however, should think more globally, since the political tension between Russia and Western countries is also why Russia is more eager to lock in deals with China. After years of back-and-forth discussions, it appears the two countries have finally agreed to deliver or receive 38 billion cubic meters of natural gas a year for 30 years starting in 2018.
Russia is the 20th largest trading partner for the U.S The US has no money invested in Russia so it would be very easy to cut out Russian trade. According to Russian Foundation chair David Clark, trade is a “relatively unimportant” component of relations. Energy links are also weakening as the U.S. looks to shale gas for its energy supplies and heads towards self-sufficiency.
Russia’s trade flows – CNN
German industry is putting pressure on the federal government to restrain the sanctions. The European Commission will put forward their proposal today, 23 July.