UK & US sanctions against Russia ‘traditionally political’

EPA/ANDREW PARSONS/HANDOUT/FILE PICTURE

The National Grid LNG facility on the Isle of Grain, Kent. Russia sent its first ever shipment of LNG to England in mid-December.

Moscow’s response to the UK measures are expected to also fall into the political sphere and should not make life difficult for UK businesses or individuals in Russia, expert writes


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As promised, the UK government announced a series of measures in response to Russia’s refusal to respond to the accusations of involvement in the poison attack against the ex-Russian spy Sergei Skripal and his daughter, however, the actions announced by British Prime Minister Theresa May were much softer than had been indicated and fall mostly into the political category or tightening of existing measures, Chris Weafer wrote.

Russian officials are dismissive of the effect of the actions but will be quietly relieved that tougher and more damaging sanctions have been avoided, the founding partner of Macro-Advisory in Moscow wrote in an e-mailed note to investors.

“Voluntary sanctions are usually more damaging. However, it would be incorrect to say there is no negative impact. The perception of Russia as a risk has again been raised and, as we saw in 2014 and 2015 as a result of the Crimea (invasion) and sectoral sanctions, these actions by Western governments do make investors and lenders wary,” Weafer wrote, adding that it may result in some delay in investment decisions and, for a period of time, make Western counterparties more cautious when dealing with their Russia partners. Those voluntary sanctions have had a negative impact in the past.

The poisoning incident and the UK’s response, albeit relatively light in economic terms, is likely to be used by Russia’s critics in the US Congress as a further reason to push for even more potentially damaging US sanctions, Weafer wrote, noting that, as had been expected the US issued a new list of individuals and entities that are to be added to US sanctions.

According to Weafer, it is not expected that Russia will place any restrictions on investment or discriminate against UK companies working in Russia. “The Kremlin has been very clear that it does not wish for bad politics to damage good business. Even when nationalist emotions in Russia were running high with the anti-Western sentiment in 2014, albeit mostly in the Duma and in late night political TV shows, the government refused to place any restrictions against US or UK companies,” he wrote.

Russia is not a big trade partner for the UK and neither is the UK a big exporter to Russia. The total value of trade between the two countries last year was less than $15 billion. That was only 1% of UK trade and 2.3% of total Russia trade, Weafer wrote, reminding that the EU is Russia’s most important trade partner and, apart from offering political solidarity with the UK, it is not expected that any of the EU states will replicate the UK’s actions.

“As far as the Kremlin is concerned, bad politics sits in one drawer while good business is in another. That has been the mantra since early 2014 and remains the case,” Weafer wrote.

Russia sent its first ever shipment of liquefied natural gas (LNG) to England in mid-December. This was from the new Yamal LNG plant inside the Arctic Circle and at a time when the UK faced a potential gas shortage, Weafer wrote, adding that Moscow’s response to the UK measures are expected to also fall into the political sphere and should not make life difficult for UK businesses or individuals in Russia.

 

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