May 29, 2015

The EU and US Sanctions against Russia: Continuation Impossible to Lift

At the end of June, this year at the European Union Summit is planned to consider the question of continuation (partial or total lifting) of sanctions against Russia, introduced by the EU leadership due to the Russian military aggression against Ukraine. Further development of the situation around Ukraine depends on how this question is resolved. It is Western sanctions that are one of the major constraints on further military invasion of Russia in Ukraine.

For example, last year's large-scale political and economic pressure from the United States and the European Union to the Russian Federation, expulsion from the “Group of Eight” (G8), interrupted cooperation with it through the EU and NATO, and especially excommunication of the Russian economy and financial system from Western loans, investments and technologies contributed significantly to the failure of Moscow plans for disintegration of Ukraine in the form of creation of the so-called “Novorossia”, which was to include eastern and southern Ukrainian regions. Besides, a large-scale military invasion of Russian troops into Ukraine (which was to “finally resolve the Ukrainian question”) was prevented. Instead, Russia has to satisfy its appetites regarding to Ukraine with the annexation of the Crimea, as well as with the attempts to create the so-called “Donetsk” and “Luhansk” “people's republics”. This has reduced strategic plans of Moscow to eliminate Ukraine as an independent pro-European state to tactical tasks, and to Russia's being involved in a protracted conflict with Ukraine, and the USA/NATO, the European Union.

Later Western sanctions forced Moscow to agree also to peace agreements to resolve the situation in the east of Ukraine, which were signed in Minsk in September 2014 and confirmed in February this year. Another Russia's concession was V. Putin's having agreed to the introduction of the Agreement on the establishment of a free trade zone between Ukraine and the EU in a pre-specified time — from January 1, 2016 (previously categorically denied by Moscow), which actually shows the beginning of the Kremlin's strategic retreat in the Ukrainian issue.

At the same time, Russia has not fulfilled its obligations under the Minsk Agreements. It had been imitating its predisposition to the peace process in order to avoid new West's sanctions. This is evidenced by the conducted by Russia and terrorists military operation to capture Debaltsevo immediately after the end of the Minsk negotiations in February this year, as well as by the return of heavy weapons to the contact line and intensification since early April 2015 of shelling of the Ukrainian positions.

So, Russia is trying to seize new territories in the East of Ukraine, as well as to make the Ukrainian authorities take the advantageous for Moscow decision to “freeze” the conflict in Donetsk and Luhansk regions.

First of all, this would mean Ukraine's recognition of leaders of the so-called “DPR” and “LPR” as “official parties in negotiations,” resumption of financing of occupied regions of Donbas and their infrastructure from the state budget, as well as cancelling the Ukrainian President's amendments to the Law “On Special Order of Local Government in Certain Districts of Donetsk and Luhansk Regions,” allowing local elections only on the basis of norms of the Ukrainian legislation.

Besides, Russia openly demands from Ukraine to give up its European and Euro-Atlantic course and to agree to the amendments to the Constitution of Ukraine on federalization, but in fact — to disintegration of the Ukrainian state.

In such a way, V. Putin's regime is trying to influence Ukraine, having preserved its control over the breakaway republics in the Ukrainian territory, and to get rid of responsibility for the life-support of the “DPR” and “LPR” while providing grounds for cancellation of Western sanctions against Russia. The latter question is particularly important for the Russian Federation, as on it depends further strengthening of economic sanctions.

Thus, contrary to the statements of the Russian Federation's leadership about “passing the lowest point of the fall of the Russian economy” in February 2015 and possible resumption of positive dynamics of its development, in March-April this year the Russian economy again entered the zone of rapid recession.

This is confirmed by the reduction in GDP of Russia in April 2015 by 3.5 % in annual terms. In some industries, the decline in production was more significant, including: in the textile and clothing industry — by 19.4 %; in the production of leather products and footwear — by 15.7 %; in the production of vehicles and equipment — by 13.5 %; in construction — by 6.7 %, which is the worst result since June 2014.

Besides, actually is paralyzed the work of a number of other major sectors of the Russian economy, including the aircraft and automotive industries, as well as production of railway carriages and locomotives due to lack of demand for these products. A significant problem for Russia is putting a stop to the US and EU's supplies of components for Russian equipment, because of which the production of some important technical means, including military and space equipment has stopped. And the Russian leadership has already admitted that the plans for import substitution have completely failed.

Despite the fact that at the beginning of this year they held artificial stabilization of the ruble, the situation in the banking and financial sector of the country is complicated. In this context, the most problematic character has the decline in revenues to the federal budget of Russia (expected to reach 1.5-2 trillion rubles in 2015) due to lower oil prices and lower tax revenues from both large and small and medium businesses.

At the same time, the outflow of foreign capital from Russia continues. In particular, more than 30 billion US dollars had been withdrawn from the Russian Federation in January-April 2015. Experts predict that in general this year, Russia could lose more than 130 billion US dollars. In 2015, the Russian government will also have to pay more than $ 100 billion US dollars debts of Russian companies, borrowed under the state guarantees.

In terms of Russia's being excluded from Western loans and investments all this will result in an increase in the RF federal budget deficit and will greatly complicate the financial support of the leading sectors of the Russian economy, as well as will virtually make it impossible to allocate the necessary funds to provide subsidies to the regions of the Russian Federation.

Thus, in 2015, transfers to the Russian regions from the Russian federal budget are planned to be reduced by 145 billion rubles, while the need in them makes 1.2-1.3 trillion rubles. As a result, further spending on social needs will be short-cut, state employees will fall under the job cut, local production will fall, and the number of unemployed will grow.

Strengthening of negative trends in the Russian economy will exacerbate social problems. Thus, in the first quarter of this year, inflation in Russia amounted to 16 %, 1.1 million people became unemployed.

At the same time, due to the sequestration of the Russian federal budget, salaries of employees in the public sector, pensions and social benefits get curtailed. And even such trimmed wages are not paid and will not be paid on time. According to the Rosstat, in the first quarter of 2015 wage arrears in Russia grew by 47 % (to 2.9 billion rubles). The main debtors are businesses of the mine industry, defense industry, agriculture and construction.

Because of these problems since April the consumer demand in Russia has been decreasing (in January-February this year, it grew a little), and has reached the lowest level of negative expectations since November 2014. The Russian population is beginning to express its dissatisfaction, which is a direct threat to the regime of V. Putin. According to the Public Chamber of Russia, a protest sentiment is observed in depressed areas of the Russian Federation — Karelia, the Trans-Baikal Territory, the Altai Territory, Khakassia, — and in the industrialized regions, including Nizhniy Novgorod and Novosibirsk regions, where a great number of large strategic enterprises cease to exist.

Taking into consideration these circumstances, V. Putin's regime is trying to achieve its goals with regard to Ukraine before the critical worsening of socio-economic problems in the Russian Federation. According to the Ministry of Finance, such a situation may arise in Russia in the first half of 2016, and the consequences of it are not easy to predict.

The inevitability of such prospects, if the sanctions imposed on Russia continue, makes its leadership accelerate the process of solving the “Ukrainian issue” in order to renew its ties with foreign countries and international organizations. Thus, increasing the pressure on Ukraine, Moscow at the same time is trying to convince the West that its “policy of sanctions against Russia” is erroneous and “cooperation between Russia and the USA and the EU must be restored.”

However, as evidenced by the historical experience and Russia's practical plans, even in case of certain compromises with the West, V. Putin's regime will not stop in Ukraine. It will continue its expansion now in the direction of a number of countries of Central and Eastern Europe, of the Baltics and the Balkans, considering them as objects of its interests and influence. At this, any West's compromise concessions to Russia, as well as signed arrangements or reached agreements would be considered by Moscow only as a sign of weakness of policy (positions) of the USA, NATO and the EU and will be treated only in its favor.

The origins of the concept of a hybrid war

A proof of such Moscow's intentions is its active promotion of its interests in the mentioned regions, including using elements of “soft power” and “hybrid wars”. In particular, for this purpose, V. Putin's regime will use the dependence of the countries of Central and Eastern Europe, Baltic States and the Balkans on Russian energy and their being interested in maintaining trade and economic cooperation with Russia, and will try to bribe representatives of the local political and business community, and to support political forces of the nationalist, Euro-skeptic, left and pro-Russian orientations.

All this directly affects the interests of the European Union, NATO and the United States. Especially because Russia leads the same policy against leading countries of the EU and NATO in the Western, Northern and Southern Europe.

So, as we can see, the situation around Ukraine actually determines the future of a united Europe, and to a large extent the prospects of the EU and NATO. Thus, if V. Putin's regime manages to reach his goals in Ukraine, it will get additional impetus and opportunities to enhance its actions in the European direction. Otherwise, the Russian expansion will be halted on the eastern border of Ukraine, which will contribute to strengthening of the security of European civilization.

The fundamental importance of this issue for the whole of the Western world is forcing the United States, NATO and the European Union to unite and focus their efforts to provide all-round pressure on the Russian Federation. And at the same time to support Ukraine, located in the forefront of the fight against Russian expansionism and totalitarianism. In fact, at this stage of the world and European development, Ukraine has got the same role — to curb Russia, which in the Middle Ages the Kievan Rus' had — to curb the Tatar-Mongol invasion of Europe.

In this regard, the most urgent is preservation of Western (international) sanctions against the Russian Federation until it has completely fulfilled the terms of the Minsk Agreements and will have returned the Crimea to Ukraine (do not forget that the first political and economic sanctions against Russia were introduced by the EU and the USA/NATO after the annexation of the Crimea by Russia). However, if Moscow resumes active operations in the East of Ukraine, the Western sanctions should be unconditionally and immediately strengthened. The decisive factor for Ukraine is being provided with the West's assistance in the political, economic and military spheres, immediate completion of the ratification and implementation of the Association Agreement between Ukraine and the EU, as well as resumption of practical steps aimed at Ukraine's accession to NATO's security coalition. Based on current realities, in this respect, Ukraine first of all has to be provided with modern precision lethal (defensive) weapons, and to be given clear political signals on the prospects of joining the EU and NATO.

In this context for Ukraine are very important the positions of the majority of Western countries and international organizations in putting pressure on Russia. In particular, within the framework of preparations for the EU Summit in June this year, the Committee on Foreign Affairs of the European Parliament has adopted a resolution calling on the EU leadership to strengthen sanctions against Russia and to provide Ukraine with arms if the Russians do not stop destabilizing the situation in the East of Ukraine and do not give up the idea of occupation of the Crimea.

Besides, the intentions to support Ukraine and keep sanctions against Russia if it does not perform the Minsk agreements, have been announced by the Federal Chancellor Angela Merkel and US Secretary of State John Kerry at the latest meeting with V. Putin (May 10-12, 2015), as well as by NATO Secretary General J. Stoltenberg during the meeting of Foreign Ministers of the Alliance members in Turkey on May, 13, 2015.

The compliance of the leaders of the US, EU and NATO with the sequence of measures and coordination of their positions on the “Ukrainian issue” did not actually let Russia resume active military operations in the East of Ukraine in May this year, of which many experts had been warning. It is necessary to continue to stick to such coordinated actions, as they are very important both for Ukraine and for the whole of the Western world.

On the contrary, the actual concessions to Russia on the part of Germany and France at the NATO Summit (Bucharest, April 2008), concerning the refusal to sign the NATO Membership Actions Plans with Ukraine and Georgia and absence of a clear reaction of the West to Russia's policy of confrontation with the USA, NATO and the EU actually untied its hands and opened the way to military aggression against Georgia in August 2008, a series of “energy wars” against Ukraine and the EU in 2009-2011, as well as to a new armed aggression against Ukraine in 2014. Who is next?

So it is up to you where to put a comma in the title “The EU and US Sanctions against Russia: Continuation Impossible to Lift”...