The European Union's sanctions against Russia — and Russia's own sanctions in response — are biting hard.
But who is really winning and losing as a result of 2014's "economic war" between the European Union and Russia?
The problem is that damage to the Russian economy — which is what the sanctions set out to do — can never be isolated. It soon ripples into damage to the Ukrainian economy, the Belarussian economy and ultimately the European Union's economy. An economically weakened EU in turn weakens the United States.
Here's a far from exhaustive list of the sanctions' winners and losers.
Losers
- European Banks
EU sanctions locked Russian banks out of Western capital markets. Unfortunately, that move doesn't benefit anyone: Russia may not be able to borrow, but that deprives European banks of an opportunity to make money. With the Russian base rate at a mouth-watering 17% Western bankers must be kicking themselves in agony over lost profits.
- British Businesses
Blocking loans to Russia has, in turn, diminished European banks' appetite for financing British entrepreneurs who might have spotted an opportunity in the Russian market. Trevor Barton, Executive Director of the Russo-British Chamber of Commerce, says, "For a small company aiming at the Russian market and wanting finance, the inability to get a loan can be the difference between becoming a successful company or folding entirely." And, of course, the sanctions have also affected British business directly: banning the sale of technology for areas of the oil industry and certain dual use goods.
- US Poultry Farmers
Poultry is one of America's most successful sectors and Russia is the second-largest trade partner for US poultry products. In 2013, $309 million worth of chicken were exported to Russia — seven per cent of the total American poultry exports. In the wake of sanctions American farmers have lost a market, and investment in the industry has shrivelled.
- European Fruit Exporters
Ten per cent of European food exports traditionally head for Russia. Europe's stoned fruit exporters are one group who were badly bruised by the sanctions. With no Russian market, lorry loads of the summer and autumn crop had no choice but to rot into compost. The fruit that was sold, was sold at a very low prices. Mediterranean peach farmers have particularly lost out: they already had a glut thanks to unusual weather conditions.
- Legal and Accounting Services
Trevor Barton says that lawyers initially did quite well in the wake of the sanctions. Many European firms that were already successful in Russia dealt with the financing of big transactions, so their expertise was needed to advise on the viability of a new transaction. But, he says the sanctions have been a double-edged sword: "If the transactions are starting not to take place that is going to affect the client's business and there might be less money."
Winners
- Risk-takers
Trevor Barton says the sanctions have created a climate of uncertainty among British businesses. But, those who are bold enough to plough ahead in the face of this, might reap great rewards, "Companies that are prepared to take the risk while other countries are backing away, are often the companies that become highly, highly successful." He goes on to say that he advises all businesses that are not directly affected by the sanctions to continue to see Russia as an interesting market, "Britain has a long history of trading with Russia, there is a lot of affection at a human and a business level."
- Risk Advisors
"There are consultancy companies whose job it is to advise people on risk: they have had quite a lot of business," according to Trevor Barton.
- Belarus
Belarus is the world's fourth biggest exporter of cheese, and that has become even more lucrative now that Russians can't get hold of French brie. Belarus is in a Customs Union with Russia which means it has no barriers to the Russian market. As Dr Richard Connelly, from the Political Economy Department of Birmingham University says, "Belarus is playing middle-man, and it's benefitting." Goods are exported from European Union countries, into Belarus. They're then re-labelled and sent to Russia for purchase. Russia has investigated this loophole and threatened to erect customs barriers. But, until that happens, Russian consumers will be able to buy seafood and fish that's supposedly been farmed in the landlocked country.
However, to say Belarus is a winner is a step too far. Dmitry Babich of Sputnik International says, "Belarus is not doing well. Sanctions led to the tumbling of the rouble. Belarusian exporters are not making much money on their exports right now, the money they make is burning. Everyone is hurting."
- European Luxury Goods Exporters
So far this sector is unaffected by the sanctions. Trevor Barton from the Russo-British Chamber of Commerce points out, "Russians are very keen to buy high quality goods and the market has not gone away." For one thing, Range Rovers and Jaguars have been almost sold out.
- Armenian fruit/vegetable exporters
Food counts for half of Armenia's manufacturing output. Grains, potatoes and grapes are particular specialties. The sanctions could provide the country with a new market, in Russia. Agriculture Minister Sergo Karapetian appears to see this opening as a chance for Yerevan to strengthen its membership credentials for the Moscow-led Eurasian Economic Union.
- Serbian pork farmers
Not being a European Union member is playing in the favour of Serbia's agricultural industry as a whole. The country has strong historical and trade relations with Russia, and Serbian ham is beginning to appear on Russian plates.
- Russian Agricultural and Industrial Producers (eventually)
Russian companies already geared towards the domestic market will benefit from import substitution.
And, in the long run, agricultural and industrial producers inside Russia stand to gain. According to Sputnik's Dmitry Babich, 2014 marks the first year since 1991 where there is widespread "distrust of Western importers" within Russian borders. With the world seeming more unstable than ever, there's plenty of evidence that it's dangerous for companies to buy everything from abroad. Russia is likely to start producing more of its own goods. However, that's a benefit that won't come until spring or autumn 2015, when agricultural products of the next crop are coming to market.
- Chilean Salmon farmers (supposedly)
Norwegian salmon was hit by Russian counter sanctions, meaning Russia is now turning to Chile. But, many of the companies that own salmon farms in Chile are actually Norwegian, according to Dr Richard Connelley: "Norwegian producers are sending salmon to Russia, but under Chile's name, not Norway's."
British shoppers are benefiting too as UK supermarkets are offering Norwegian salmon for half its usual price.
However, while sanctions continue, the world is unstable. Everyone suffers as a result of that. Indeed, sanctions rarely have their desired effect. According to Dmitry Babich of Sputnik International, the European Union and the United States have such vague intentions that their sanctions regime will only exacerbate pain in the long-term.
