Impact of sanctions on Russia still to come

Impact of sanctions on Russia still to come

Foreign Ministry says inflation and loss of foreign capital will increase next year

Prague, Dec 14 (ČTK) — The main impact of the Western sanctions against Russia can be expected during next year, but Moscow may change its attitude to Ukraine only in a medium-term period, the Czech Foreign Ministry says in its report that the government is to debate on Monday.

The EU and the United States imposed economic sanctions on Russia in the summer over its involvement in the Ukrainian crisis.

The Czech diplomacy's document, that the Czech News Agency has at its disposal, points out that the sanctions and their presentation in the Russian media open space for Moscow's further repressions against the civic society and the press freedom in the country.

“The most visible symptoms of the current situation are the ruble's fall, a limited access to financial markets and the capital's outflow. Along with the decline in oil prices, they cause a synergistic effect that significantly harms the Russian economy,” the report says.

“The main impact of the sanctions combined with other factors will be manifested only during 2015 when we can expect a further inflation rise, a real rise in prices and the continuing outflow of foreign capital,” it adds.

Strategically important investment projects in Russia are also halted due to the banned access to Western financial markets, the document says.

The long-term sanctions along with the current low oil price will lead to “internal political dilemmas” whether to support inefficient state firms or carry out internal reforms and diversify the economy.

“The sanctions' clear impact on a change of the Russian policy towards Ukraine can be realistically expected in a medium-term period,” the report says.

“However, according to some opinions, without the sanctions the Russian approach would be even more ruthless,” the report says.

The anti-Russian sanctions would have a strong influence on the geopolitical balance. A number of countries have re-assessed their political and economic relations to Russia and have contributed to international changes on a political and economic level. These states have started strengthening their relations with China, Turkey and Iran.

The report also admits that the Western sanctions alone are not to blame for the current problems of the Russian economy. Long-term structural problems play an important role in them, caused by a strong focus on mining and export of raw materials and the loss of trust in Russia as an economic partner, the report adds.

“Though the impact of the sanctions is clearly visible, they considerably hit the Russian economy and complicate their modernization, at he same time, they cannot be considered the only cause of the current Russian problems,” the document points out.

Read more: http://www.praguepost.com/economy/43283-russian-sanctions-main-impact-will-come-in-2015#ixzz3LwEf2k6Z
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