Russian analysts warn that the introduction of more sanctions would herald a 'new reality' – that is, war
The German government is considering the possibility of introducing new sanctions against Russia, reports The Wall Street Journal, citing an unidentified source.
Berlin's motivation is Russia’s behavior in Syria, which, according to German legislators, has exacerbated the situation there. Since the latest ceasefire collapsed in late September, Russia has come under increased criticism for stepping up air strikes on rebel-held positions in besieged parts of the city of Aleppo.
All's calm in Berlin
It is unclear what German parliamentarians think about these new restrictive measures in respect to Russia. But German Foreign Ministry Spokesman Martin Schaefer said on Oct. 5 that proposals on imposing sanctions against Russia over its policy in Syria were not being discussed.
"I don't know anyone in Berlin or anywhere else who has made this proposal," said Schaefer.
Moscow views the publication on the possible introduction of sanctions in the same light. Since there are no official statements, there is no subject for discussion. The Kremlin does not consider discussions on sanctions constructive, pointing out that officially Moscow is not violating international law in Syria.
"Let us not forget that the Russian Federation is the sole country whose armed forces are in the Syrian Arab Republic on legitimate grounds from the viewpoint of international law," said Russian presidential press secretary Dmitry Peskov.
The sanctions against Russia were introduced by the U.S., the EU and other countries in 2014 as a response to Russia's seizure of Crimea and fomenting of unrest in eastern Ukraine.
The sanctions affected state companies and state banks, but also private companies linked to individuals involved in the conflict with Ukraine, including those from Russian President Vladimir Putin's close circle. Moreover, restrictions on the supplies of technology and equipment for the oil and gas industry and the defense industry and on dual-use production were also imposed.
War – the ‘new reality’
Experts interviewed by Gazeta.ru doubt that sanctions will be increased against Russia.
"Sanctions will not increase because of the situation in Syria. I think this subject is closed," said German political analyst Alexander Rar, who believes that not too much meaning should be assigned to The Wall Street Journal article since the publication usually assumes a harsh position towards Russia.
According to Rar, a new round of sanctions against Russia is unlikely because a government's defense of its geopolitical interests should not be punished in this way, otherwise this will engender a new reality. Apparently, by "new reality," Rar, who always chooses extremely cautious terms, implies military action.
When Gazeta.ru asked Rar if Angela Merkel would be interested in initiating new sanctions, for example, to support her ratings, which have declined due to problems with migration, he said that public opinion in Germany is “mostly against the extension of sanctions and in general the desire to re-establish cooperation with Russia is growing in the EU. Therefore Merkel would not win anything from this."
However, the position of the "party of war" is also strong, admits Rar.
Earlier, the Alliance of Liberals and Democrats for Europe Group (ALDE) introduced a resolution project in the European Parliament for the regulation of the Syrian crisis.
The document describes the situation in Aleppo as a humanitarian catastrophe. Diplomatic efforts have failed allegedly because of Russia and the world community lacks the effective instruments to guarantee respect for human rights. The resolution proposes to establish a no-fly zone over Aleppo in order to guarantee humanitarian aid and the evacuation of the wounded, as well as to prepare a plan for introducing new sanctions against Russia.
‘It can't get worse’
If the situation in Syria becomes a motive for the West to increase its sanctions against Russia, it will not have a big effect on the fuel and energy industry.
"Two years have passed since the introduction of sanctions; it can't get worse. The oil industry has adapted. The necessary equipment – both German and American – is being bought through China and India," said Viktor Kostyukov, a leading analyst at the Algorithm Fuel Integrator company.
Russian consumers of household appliances and electronics should also not fear any new sanctions. The world's primary producer of electronics – China – is, in general, friendly with Russia.
And as far as the defense industry is concerned, for example, the ban on the import of Russian military technology and separate types of weapons, most EU countries and the U.S. are not the key clients of Russia's defense industry. Besides, practically all the large Russian defense companies are already on the blacklist, explained Ivan Andriyevsky, first vice president of the Russian Engineers' Union.
Realistically, what Western countries can do is call on the largest importers of Russian weaponry to stop trade operations with Moscow under the threat of terminating cooperation programs with them.
According to Rostekh, in the first eight months of 2016 Russia exported $7 billion worth of armaments and military technology. Rosoboronexport's portfolio consists of orders with a total value of $46 billion.
Bankers would have it worst of all
The worst thing that the West can do is increase restrictions in the financial sphere. This will have a bad effect on all types of businesses. Even as it currently stands the Russian government and central bank have not been able to give domestic businesses the same type of inexpensive and long credit that they received from international capital markets.
"The West introduced sanctions against state banks, which made sense. Private banks were not limited in the movement of capital. But if now they try to close the flow of capital for private banks, this will be a strong move," said Natalya Orlova, chief economist at Alpha Bank.
Investors should also fear Russian sovereign bonds being blacklisted. The Russian Finance Ministry is planning to issue sovereign Eurobonds worth $3 billion in 2017.