Economic sanctions targeting Russia could also cost several European countries dearly and strengthen the partnership between Russia and China.
As members of the European Union concert to impose tougher economic sanctions on Russia, they must consider the negative effects they may have on their own economies. “It is early to know what the full response of the European authorities will be, but inevitably there will be a cost for Western countries, even if it will be less than for Russia”, summarizes Arthur Silve, professor at the Department in economics from Laval University.
The European Union is indeed the first economic partner of the Russian Federation, representing 37.3% of the country’s trade in 2020, according to the European Commission. For its part, Russia is the 11and world economy if we consider its gross domestic product (GDP), which is barely higher than that of Spain. She is the 5and trading partner of the European Union, which represents 4.8% of its trade.
There will be a cost for Western countries, even if it will be less than for Russia
Their trade, however, is very strategic. Still according to the European Commission, 26% of oil imports and 40% of natural gas imports into the European Union come from Russia. “It’s an interdependence, since Central Europe is completely dependent on gas from Russia, and Western Europe in large part,” underlines Magdalena Dembinska, professor of political science at the University of Montreal.
Germany announced a few days ago the suspension of the Nord Stream 2 natural gas pipeline project, which connects it to Russia thanks to massive investments. For how long will the project remain blocked? Could the Nord Stream 1 gas pipeline, already in operation, also be stopped? If this were the case, Europe would deprive itself of 55 billion cubic meters of natural gas annually, if we are to believe the Gazprom website.
“From the point of view of Europe, it is difficult to turn to other sources of supply, such as Norway, because there is not necessarily the infrastructure to bring this gas and distribute it”, explains Mme Dembinska.
A limitation in gas supply would potentially jeopardize Germany’s energy transition by forcing it to continue using more polluting sources, such as coal.
Ineffective sanctions
Economic sanctions imposed by Europe since the annexation of Crimea in 2014 have had negative effects on its economy, but have not prompted Russia to back down. What could make a difference this time around?
Professor Arthur Silve mentions the idea of cutting off Russian banks from the SWIFT system, a secure messaging protocol used in financial exchanges between banks. “It would be very complicated for Russia to deal with it, since a large part of the transfers go through this system, believes Mr. Silve. But there are billions of dollars of Russian debt in Europe held by European banks, and the interest on that debt would no longer be paid, at least for the duration of the sanctions. It is therefore a real cost to pay for Europe. »
Mr. Silve wonders if Western populations are ready to pay, while Vladimir Putin’s tactic is to “check how far they are able to resist”.
The economics professor also points out that Russia has accumulated a real “war chest” via a national investment fund, in which there is a reserve of nearly 200,000 billion US dollars.
“It makes Russia independent of external financing and debt refinancing which has been officially blocked by Biden for two days. But it’s been three years since the Russians issued dollar debt in international markets, so they’re pretty independent of the sanctions that have been implemented,” Silve said.
Look to China
As much to export its gas and oil as to circumvent financial sanctions, which Moscow could see coming, Russia can also turn to China, believes the former Canadian ambassador to China Guy Saint-Jacques. This country is already a very important trading partner, far ahead of the United States.
If their relations have not always been a long calm river, the two countries have come a lot closer, to reach what would be a summit. By avoiding condemning the Russian invasion, China is also breaking with its values of protecting sovereignty and territorial integrity, underlines Mr. Saint-Jacques. The latter even believes that Vladimir Putin would have listened to a request from China not to invade Ukraine before the end of the Beijing Olympics.
“Chinese companies, however, are going to have to be careful, because the Americans are going to carefully monitor companies that are going to want to violate the sanctions. This was the source of the problem with Huawei, which had violated the sanctions against Iran. It will have to be a calibrated approach on the part of China, ”analyzes Mr. Saint-Jacques.
Chinese leaders will also watch with interest the strength of Western reactions to the Russian invasion to adjust their policy towards Taiwan, said the former ambassador. If they are not very harsh, they might be tempted to adopt a more bellicose approach towards the island, which they have wanted to bring back under their control for decades.