Sun | Sep 24, 2017

EU businesses anxious to end Russia sanctions

Published:Thursday | June 9, 2016 | 6:00 AM

In a sign of the growing frustration amid companies across Europe to get back to business as usual, the French Senate overwhelmingly voted on Wednesday to urge the government to lift economic sanctions on Russia.

The resolution to "gradually and partially" lift sanctions was approved by 302 votes for and 16 against after hours of debate - and despite the opposition of France's Socialist government.

France's junior minister for European affairs, Harlem Desir, told senators restrictions could only be relaxed following the "full implementation" of the Minsk peace deal for Ukraine.

"When the Minsk agreements are implemented, sanctions will be lifted," he said.

Wednesday's vote is non-binding, but it's a barometer of European frustration with the sanctions. For years, the European Union was Russia's biggest trading partner, but two years ago, the EU imposed sanctions in response to its actions in Ukraine. They range from banning the export of oil equipment to barring Russian banks from accessing long-term lending. In retaliation, Russia moved to ban all vegetable, dairy and meat imports from the EU.

EU imports from Russia dropped by a third last year compared with 2013, the year before the sanctions, while agricultural exports to Russia halved.

French oil, auto and food companies have suffered from the sanctions and Russian embargo and have long quietly lobbied French politicians to lift them. Several pro-Russia lawmakers in the French parliament, mainly in the conservative Republican party, have complained that the sanctions are hurting the French economy and argue that France and Europe should not follow US policy on Russia.

One of the countries where businesses are most worried about the impact of the trade war is Germany, Russia's biggest trading partner before the sanctions.

EYEING LARGER MARKET SHARE

German businessmen are anxious for sanctions to be lifted, and the longer they are in place, the more difficult it will be for the German companies to reclaim their market share, said Matthias Platzeck, chief executive of the German-Russian Forum, a powerful lobby group that works to advance the interests of Germany in Russia and Russia in Germany.

Platzeck, a former Brandenburg governor and longtime critic of the sanctions who was visiting Russia earlier this week meeting with Russian and foreign businesses, says he feels that German politicians seem more inclined to lift the sanctions than a year ago.

"I have a feeling that many people in Europe have now realised that the policy of sanctions, it brings nothing," he said speaking of European politicians.

The sanctions initially didn't meet any major resistance from business in Germany, but dairy producers have been grumbling recently that they have been left with a glut of milk that they've been unable to export to Russia, among multiple other problems, causing prices to fall below costs. The government has pledged at least €100 million to help and is in talks with authorities in Brussels for further solutions.

In recent weeks, both Vice-Chancellor Sigmar Gabriel and Foreign Minister Frank-Walter Steinmeier have talked up the possibility of rolling back sanctions against Russia, but making clear that this would only be possible with the implementation of the Minsk peace agreement for eastern Ukraine.

The sanctions against Russia were initially imposed over its annexation of Ukraine's Crimea and were extended after Russia threw its weight behind separatist rebels in eastern Ukraine. Russia's mediation in the Minsk talks was seen as a sign that Moscow was willing to stop its interference and use its influence on the rebels to stop the ongoing war.

Privately, some German diplomats acknowledge that the sanctions have not had the desired effect yet and that the EU could not drop them without a major loss of face even if it wanted to.

Dmitri Trenin, director of the Carnegie Moscow Center, says the sanctions have certainly hurt Russia, but they aren't fatal.

The Russian economy contracted by nearly 4 per cent last year and unemployment is on the rise, but prudent fiscal policies and a sizeable rainy-day fund have saved Russia from disaster.

- AP