Azért fáj az nektek… / Oh yeah that hurts you…


EU Projects Impact of Sanctions on Russian Economy

Forecast Sees Less of an Impact on European Growth Rate

Russian President Vladimir Putin in Ulan Bator, Mongolia, on Sept. 3.ENLARGE
Russian President Vladimir Putin in Ulan Bator, Mongolia, on Sept. 3. AFP/GETTY IMAGES

BRUSSELS—European Union sanctions on Russia over the Ukraine crisis will have only a modest impact on Europe’s economy this year and next but hit Russia’s growth rate harder, according to an EU analysis seen by The Wall Street Journal.

EU member states decided Tuesday to maintain their current sanctions, which include restrictions on trade with Russia’s defense, financial, and energy sectors, after a promised review. Diplomats said there was broad consensus at a meeting of EU ambassadors that there were no grounds for easing or tightening the measures at this stage.

During the meeting, the European Commission, the bloc’s executive body, also presented its overview of the impact of the measures, which were imposed in late July and early September in conjunction with the U.S. and other countries.

According to the document the hit to the EU’s economy “is expected to remain contained.” The commission estimated that EU sanctions will knock 0.2 to 0.3 percentage point off the bloc’s economic growth this year and next.

By contrast, Russia’s growth rate will be cut by 0.6 percentage point in 2014 and 1.1 percentage points in 2015, it forecast. In May, the commission had a forecast of 1% growth this year and 2% next year for Russia.

However, it noted that real data was limited and that it was difficult to distinguish the sanctions impact from the hit Russia has taken from a slump in the oil price and a broader economic slowdown. The forecast also excludes any hit Russia will face from sanctions imposed by the U.S. and other countries.

Still, the commission view is in line with other recent forecasts. This month, the International Monetary Fund forecast growth for Russia of just 0.2% this year and halved its 2015 forecast to 0.5%. Analysts at Barclays are forecasting around zero growth for Russia in 2014 and a contraction of 0.5% in 2015.

While there is broad support for the sanctions within the 28-nation EU, a number of senior politicians, including incoming EU foreign policy chief Federica Mogherini, have questioned their effectiveness in influencing Russian President Vladimir Putin decisions toward Ukraine.

The governments of Hungary, Slovakia and Cyprus have voiced concerns that the sanctions could have a significant negative impact on their domestic economies.

In Germany, Europe’s biggest economy, exports to Russia were 26% lower in August than a year earlier, and down 17% year-over-year in the January to August period, the Federal Statistical Office said Wednesday.

Russia is still a relatively small market for Germany, accounting for just 3.3% of its total exports of goods and services last year. However, the Ukraine crisis has hurt overall business sentiment, aggravating an existing slowdown.

The commission said Russian countermeasures against the EU, including banning many food imports, had placed “serious pressure” on the region’s farmers, the document showed.

Russian Energy Minister Aleksandr Novak, center, arrives at a Brussels meeting seeking to resolve a gas dispute with Ukraine on Wednesday.ENLARGE
Russian Energy Minister Aleksandr Novak, center, arrives at a Brussels meeting seeking to resolve a gas dispute with Ukraine on Wednesday. EUROPEAN PRESSPHOTO AGENCY

The commission said its financial restrictions have helped pressure the ruble lower and raised the cost of borrowing for Russian firms, forcing Russia to inject €5 billion ($6.37 billion) into two sanctioned banks.

Overall, EU bank exposure to Russia fell some 7% since the start of the year and a number of refinancing transactions planned by Russian borrowers have been canceled, according to the document.

The EU estimates capital outflows from Russia will hit $120 billion this year.

The commission said member states have imposed 45 export bans on so-called dual-use goods for Russia so far this year, against 12 for 2013. Data for August show a decrease in export values of 64% compared with the same month a year earlier, the document said.

The commission said the European Bank for Reconstruction and Development estimates its pipeline of projects for Russia has fallen by up to 13 projects for Russia since June, representing around €673 million.

“In short…the sanctions introduced in July and September are impactful on Russia and are indeed operating on the right pressure points,” the document says. “Their impact is being progressively felt and will increase…in the course of 2015.”

The commission said two decisions are pending. One will establish guidelines defining the exact scope of the energy-technology sanctions, which stop high-technology sales for deep water oil exploration in the Arctic.

In addition, the commission said the European Investment Bank, the EU’s financing arm, will decide whether to stop disbursing already agreed loans through the EU subsidiaries of the five sanctioned Russian banks. That would squeeze lending to small businesses in Russia.

—Ian Talley in Washington contributed to this article.

Write to Laurence Norman at

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