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German Business Sharply Protests EU Sanctions Against Russia

Germany has already lost 6.5 billion euros in trade in 2014, and is expected to lose another 8.5 billion in 2015

This post first appeared on Russia Insider

Originally Appeared at German Economic News. Translated from the German by Susan Neumann

The Committee on Eastern European Economic Relations has used unusually strong wording to protest against the EU’s extension of sanctions against Russia. The Committee praises Russia and and at the same time, puts an end to the fairytail that trade with Ukraine could compensate for the losses incurred with Russia.

Today and tomorrow (19, 20 December), representatives of the 28 EU member countries will come together to decide, among other things, another six-month extension of the economic sanctions against Russia. The Chairman of the Committee on Eastern European Economic Relations, Eckhard Cordes, spoke on this topic as well as the planned January 1st implementation of the Deep and Comprehensive Free Trade Area (DCFTA).

"After suffering a loss of 6.5 billion euros in 2014, German exports to Russia will be expected to decline another 8.5 billion euros in 2015. Even considering the trade with Ukraine and other countries in the region, we will continue to see massive losses.

Even if the mutual sanctions have only partly been the cause of this dramatic development, it’s clearly obvious that in the interests of all sides, we urgently need to begin implementing an exit strategy for the sanctions.

We hoped that the leaders of EU countries would display more courage to start a rapprochement with Russia, which in recent months sent signals on de-escalation [related to EU-Russia ties]. It’s disappointing how the sanctions of the EU will now be extended for another six months without any debate. Again, the opportunity to reach out to Russia and return to a more positive dynamic in our mutual relations has been lost. The existing sanctions weaken liberal positions in Russia and the population gathers behind the politics of the Kremlin, despite existing reform deficits, as evidenced by recent surveys.

It’s completely overlooked that Kiev must also make a decisive contribution in implementing the Minsk Agreement, such as undertaking constitutional reforms. We’ve unfortunately seen no progress in this arena.

It wouldn’t be in the interest of Ukraine’s economic development if the relationship between Russia and the EU were to improve. The compensation of increased trade with the EU that could make up for the massive losses incurred in Ukraine-Russia trade will not happen for years to come. Concerning its exports with Germany, the Ukraine reached only a weak increase of EUR 50 million (+3 percent) in September, 2015. The Ukrainian exports to the EU as a whole will also continue to decline in 2015, despite the preferential granting of trade privileges.

It’s currently feared that the complete implementation of DCFTA on January 1 will further exacerbate the existing trade conflict with Russia.  The rounds of trilateral trade talks between the EU, Ukraine, and Russia, which were supposed to focus on developing solutions for easing Moscow’s concerns, are in the process of failing.

We therefore welcome the initiative of the German Minister of Foreign Affairs, Frank-Walter Steinmeier, who wants to use the trilateral negotiations to push for closer economic cooperation with Russia and the Eurasian Economic Commission (EEC). The German Federal Government must do everything it can to win back the support obviously missing from the EU partners and the [European] Commission.

A renewed escalation of the Ukraine conflict after the implementation of DCFTA on January 1 must be avoided at all costs. An escalation would increase the already existing uncertainty that has plagued investment in the region. The Ukraine and the EU need access to Russian markets in order to improve their economies."

Dr. Eckhard Cordes is Chairman of the Committee on Eastern European Economic Relations until December 31, 2015. This post will be taken over by Wolfgang Büchele, Chief Executive Officer of Linde AG, on January 1, 2016.

The Committee on Eastern European Economic Relations was founded in 1952 as the first regional initiative of the German economy. The Committee on Eastern European Economic Relations represents the German economy in bilateral fora and annually performs a variety of informative events, business trips and conferences in over 21 countries. The organization is based in Berlin and sees itself as a center of competence, representing the German economy for EECA future markets. The Committee on Eastern European Economic Relations is supported by five major business organizations and 220 member companies.

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