What you NEED to know about the economic sanctions on Russia
July 17 will be one of the best remembered days of 2014 in the Netherlands. It was the day of the MH17 crash in the Ukraine, instantly killing 284 people including 196 Dutch citizens. It did not only hit hard in the Netherlands, it was time for the whole world to involve itself in the misery that is going on in the Ukraine. In order to draw Putin’s attention, both the United States and Europe implemented economic sanctions against Russia, but what are these sanctions actually?
Russia has been blamed for supporting the pro-separatists, who first declared the Crimea as Russian property and then moved on to other parts of Eastern Ukraine. After the crash of Malaysia Airlines’ Boeing 777, it was time for the United Nations to involve itself in this dispute after a rocket from the pro-separatists took down the plane.
The economic sanctions stage by stage
The European Union, United States and several other countries imposed economic sanctions on Russia in several different stages. In stage 1, which was implemented in March this year, the European Union, the United States and several other countries such as Canada banned visa from important Russian figures within Putin’s inner circle and froze their assets. This was all done in result of the annexation of the Crimea. As a result Russia replied with a list of 10 American citizens that would be blacklisted.
On April 28, stage 2 was implemented, which resulted in extending the list of people that could not travel to the EU, the US and the other countries that implemented the sanctions. Furthermore, the US prohibited business transactions with 7 Russian officials and 17 Russian companies with links to Vladimir Putin. In July the blacklist was extended with multiple individuals and companies, who were also restricted from trading with the participating countries.
After the MH17 crash, the third round of sanctions was implemented on July 31. Amongst others, this included financial trading restrictions, so that state-owned Russian banks could not raise long-term loans in the EU anymore. Also, the import and export of arms related material was prohibited. Thirdly, the EU would not export a wide range of oil industry technology to Russia, however gas remained unaffected. In response to these recently implemented sanctions, Russia boycotted the import of agricultural goods by an embargo for a one year period for all countries that had implemented some or all of the economic sanctions. This embargo came into effect on August 6.
What does this mean for the Netherlands?
The Netherlands is with 9.2% in total, the largest single recipient of Russian exports and outside of the European Union, Russia is the biggest market for flowers. In 2011, imports from Russia to the Netherlands amounted to £13.2 billion and exports to Russia amounted to £5 billion. These numbers imply the Netherlands had good import and export relations with Russia, which will now be severely affected.
Currently, we are already noticing an excess in agricultural goods, such as paprikas, tomatoes and cucumbers, resulting in a steady decline in price. Farmers and suppliers will have to take the hit for it. Moreover, as many supermarkets have made long term contracts with their suppliers fixing the price of the delivered agricultural goods, the Dutch customer not will benefit from this decline in price in the near future.
According to the Dutch Central Bureau for Statistics (CBS) the Russian boycott is going to cost the Dutch companies at least €300 million. However, this is still a preliminary estimation. It is clear for everyone that the sanctions are going to have an economic impact not only on Russia, but also on the other parties involved. As French president François Hollande put it “for sanctions to be effective, they must hurt those they target and those who impose them.” We will now have to find out who has the longest breath.