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Russia-EU economic sanctions

Russia's countersanctions not affecting EU, expert tells DW

With its latest decisions, the US Senate has given new impetus to the sanctions game between Russia and the West. But economics expert Daniel Gros tells DW how Russia's sanctions on the EU have failed to make an impact.

DW: You say that Russia's response to EU sanctions has been rather damaging to Russia itself. This means that you are contesting Russian President Vladimir Putin's repeated claims to the contrary. How have you come to this conclusion?

Daniel Gros: If countersanctions cut your own economy off from its cheapest suppliers, you can only lose. This has been the case with Russian imports of foodstuffs, which have been affected by Russia's sanctions or countersanctions.

You argue above all that Russian households have lost purchasing power.

Exactly, especially in the food sector. European producers deliver the best-quality and cheapest products. So Russia has had to switch to other, more expensive suppliers. As a result of the countersanctions, Russian households have thus lost a good deal of spending capacity. You can see this in the consumer price index when factoring in food prices.

In a report, you have analyzed the impact of Russia's countersanctions against the EU on the bloc and its economy. What did you find?

You just have to look at the raw numbers. These do show that European exports to Russia fell. But that happened only because Russia was importing less overall due to a recession that it was - more or less coincidentally - suffering at the same time as a result of low oil prices.

Food exports were the only EU sector to suffer slightly more from the countersanctions. But we can see that European producers are obviously highly flexible, as total EU food exports didn't decline. This indicates that European producers have compensated elsewhere for the loss of the Russian market. That is probably why the cost of countersanctions to the European economy was practically nothing.

Belgien Daniel Gros EU-Experte (DW/B. Riegert)

Gros' assessment is positive for the EU

Your assessment seems much more optimistic than that of, for example, the Austrian Institute of Economic Research (Wifo). Its study claimed that the EU lost billions of euros and thousands of jobs. What would you say about that?

First of all, you have to keep in mind that Russian imports collapsed because oil prices fell by half. That's something fundamental that can't be easily dismissed. Second, the Austrian study assumes that fewer tourists are coming to Europe because of the sanctions and Europe's tourism is suffering. However this, too, is not evident. For we have to assume that with less income - because of oil prices, not sanctions – Russians also have less money for going abroad. I'd say that nearly the entire loss to EU exports to Russia can be blamed on the collapse in oil prices.

The opinion is widespread in Russia that the EU would break down without the Russian market. But based on your assessment, the EU could easily afford to continue a harsh economic course of action against Russia.

Yes, that is abundantly clear. The European economy is more than 10 times bigger than Russia's, and it is much more flexible. It has a very strong industrial basis. Russia's exports amount to oil, gas and a few other raw materials. Russia is undoubtedly an interesting market for Europe, but it is a secondary one and doesn't play a decisive role in the survival and growth of the European economy.

When the new US sanctions against Russia come into force, the spiral of sanctions could perhaps soon impact on Russian exports of primary commodities to Europe. The pipeline project Nord Stream 2 would then be in jeopardy. Within the EU, not all are convinced of its benefits: Berlin backs the pipeline, while eastern Europeans are worried by it. How do you see things?

I think that politics should be left out of the matter. It is certainly not one that is important for Germany. It is about the Russians wanting to lay a second gas pipeline through the Baltic Sea at their own cost. No one knows whether it will be used in future. Germany can manage without it, as the pipeline that is there now is not even being used to full capacity. Gazprom will have thrown a bit of money out the window, but I don't think stopping it doing so is a big political task about which there should be much quarreling.

Daniel Gros is the director of the Centre for European Policy Studies in Brussels (CEPS).

The interview was conducted by Mikhail Bushuev.

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