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Wrong Strategy: Sanctions Hit EU Harder than Russia

The Russians are increasingly buying domestic products because of the import ban. The EU countries, however, are experiencing a significant downturn in exports

The article originally appeared at German Economic News. Translated for RI by Anita Zalaldinova

The sanctions and counter-sanctions have obviously done more harm to the EU than Russia. The Polish EU Council President Donald Tusk admitted in an interview with Polish media representatives after the EU summit that it was difficult to unify position of the EU countries against Russia: more than half of the EU members demanded an easing of sanctions, said Tusk, who belongs to the hardliners himself, according to Moscow Times. However, Spain, Italy, Greece, Cyprus, Hungary, Austria and Slovakia have already announced publicly that they no longer think too much of the sanctions because the economic problems are significant.

<figcaption>How the EU sanctions work</figcaption>
How the EU sanctions work

France has so far kept silence. But if, as expected, the Front National emerges as the winner of the local elections on Sunday and the ruling Socialists will have to take a clear defeat note, President Francois Hollande could change sides to the camp of the sanctions opponents.

American news agency Bloomberg finds much more friendly words for Russia. In the analysis by the former Bloomberg chief editor Matthew Winkler the author states that international investors continue to invest in Russian companies. Many companies report that they have recorded higher sales than in the previous year 2014. According to Bloomberg holders of Russian government bonds have won by 7 percent with Russia Local Sovereign Bond Index this year, while government bonds in other emerging countries have lost  1.1 percent. The MSCI Emerging Market Index has shown that Russian companies are more profitable than companies in comparable economies.

Winkler comes to the conclusion that the sanctions caused the recovery: the Russians were forced to buy local products, and as a result companies have benefited. The Russian economy has proved remarkably resilient, despite the rouble crash.

However, there are problems in the Russian banking sector: German Gref, CEO of Sberbank, said, as Moscow Times reports, that the banks have not yet seen the worst. He expects a shrink in the economy of Russia in the coming year. The Russian banks have problems with financing as they are excluded from international funding opportunities because of the sanctions.

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