International Economics

Is a new “Cold war“ behind the corner?

Professors Name: Prof. Ing. Dittrich 

Student Names:Makarava Nastassia, Sindhav Arjun, Pavlova Anastasia, Peresypkina Maria, Imanov Ali, Ajmeri Juber, Bala Pushpen

Table of Content

*Introduction & Overview *The Role of Russia in the World Economy*Trade relations between EU and Russia, USA and Russia*Sanctions imposed by EU on Russia*Sanctions imposed by USA on Russia*Impacts of sanctions on Russia*Conclusion*References

*Introduction & Overview *The relationship between USA, EU and Russia

*USA and the EU based on common strategic interests*Increased tensions & pressure in relationship due to:-geopolitical rivals, -penalties, -restrictive political negotiations and -economic measures -embargos

*Russian Economy in the world *Russia Crisis (1992-1998)

*The economy got heavy blow as a result Russian Ruble devalued,*significant decline in production and living standards.*sharp jump in inflation.

Post-crisis was soon overcome by way to large-scale growth. *A significant role in this growth played a change in the

macroeconomic policy of the Russian authorities, occurred after the change of composition of the government and the Central Bank.

Russia in World Crisis (2008-12)

Finance crisis in America which was the main impetus for the European Union, Russian Federation and many other developed countries.

Russia Today (2015)

In the spring of 2015 the head of the IMF Christine Lagarde said that "global economic recovery continues, but it is modest and uneven. People in many parts of the world do not feel this recovery.

Today, Russia is the largest exporter of weapons and equipment for the energy, nuclear and space industries. -Member of G-8-Permanent member of UN Security Council.

All this makes Russia a very important element of the global economic community.

Trade relations between EU and Russia, USA and Russia

EU and Russia Trade Relations:

*EU is the Russia's biggest neighbour and also the number one trading partner.*According to the Energy Information Administration (EIA), European

countries import 84% of Russia's oil exports, and about 76% of its natural gas.*Germany is the single biggest importer of Russian oil and gas.

US and Russia Trade Relations:

*As of 2010, Russia is the source of 1.3% of American imports, up 244% to $26.8 billion a year from 2000 levels. *Exports to Russia have seen similar growth, up 343% to $9 billion between

2001 and 2010.*Russia exports mainly inorganic chemicals and oil to US and imports aircrafts

parts and meats.

Sanctions:* The Russian role in the Ukraine conflict has seriously affected EU-Russia relations. Most EU-

Russia cooperation programmes have been suspended targeting the areas:

-Imports coming from Crimea with Ukrainian origin will be prohibited.-EU has imposed ban on investments. All supply related, finance and real estate firms investments cannot be made EU citizens.-EU will not allow trims related Visa to Crimea and it private cruise will not be allow to enter EU waters without any emergency.

*USA imposed sanctions against Vnesheconombank (VEB), Gazprombank and SBER bank are worst affected as they will not be eligible to get loans from Americans banks or MNC’s anymore.

* The loans provided to these banks will be short-term and US citizens will not be able to buy bonds of these companies. VEB and Gazprombank accounts for $1.2 billion loans and it will reduce refinancing the firms across USA and Russia.

Reasons for Sanctions:

On 22 June 2015, the Council extended EU economic sanctions, which were introduced in response to Russia's destabilising role in Eastern Ukraine, until 23 June 2016.

Most EU- Russia cooperation programmes have been suspended targeting the areas:1. Access to the capital markets2. Defence3. Dual-use goods4. Sensitive technologies (Including those in the energy sector). 5. EU has imposed ban on investments. All supply related, finance and real-estate firms investments cannot be made EU citizens.

In 2014 ,US took major decision after the Russian military intervention in Ukraine, US Sanctions Executive Order for 'Blocking Property of Certain Persons Contributing to the Situation in Ukraine'.

Impact of Sanctions:

The sanctions by USA and EU will disrupt the monetary policy and the Central bank of Russia as they will–

-Low Real GDP due to reduced trade activities.-Reduced Interest Rates.-the reduced interest rates will make the inflation rise in the country which go up to 16.7% then the present which is just around 10%.

-Russian MNC’s outrage as they will have to trade with other countries for profits.

Conclusion:*The presence of Russian troops in Crimea has worst

affected the Stock and bonds. The reason is unclear is it due to Russian troops or economic sanctions.*The Putin’s reluctant and stubborn behaviour has

escalated sanctions tensions and instead of against individual it can grow at higher level as predicted by various economic and political experts. However, the EU and USA has not shown pure support for the third round of sanctions against Russia in 2016.*To sum up it is important for Russia to get rid of the

Crimea and Ukrainian crisis and should make better relationship towards its neighbourhood.

References:

Sanctions on Russia are 'economic war'Holly Ellyat,Friday, 30 Jan 2015 | 8:50 AM http://www.cnbc.com/2015/01/30/new-sanctions-on-russia-are-economic-war.html

Russia: EU extends economic sanctions by six months 22/06/2015 09:45http://www.consilium.europa.eu/en/press/press-releases/2015/06/22-russia-sanctions/

Russia reacts to EU sanctions with further western trade embargos Thursday 11 September 2014 16.46 BST http://www.theguardian.com/world/2014/sep/11/russia-eu-sanctions-west-trade-embargos-cars-ukraine

EU agrees economic sanctions on Russia, EUROPEAN VOICE, ANDREW GARDNER 7/29/14, 7:12 PM CET Updated 8/8/14, 5:03 PM CET http://www.politico.eu/article/eu-agrees-economic-sanctions-on-russia/ 

Russian Economic Report 2015. http://atlas.media.mit.edu/en/profile/country/rus/

US Department of State, Diplomacy of Sate in Action http://www.state.gov/p/eur/ci/rs/200years/

Obama and Medvedev meeting in Moscow. Courtesy of flickr.com/MikaStetsovski 23 June 2015http://politicsandpolicy.org/article/us-and-russia-new-trade-policy

* The White House,Office of the Press Secretary, March 04, 2014 https://www.whitehouse.gov/the-press-office/2014/03/06/executive-order-blocking-property-certain-persons-contributing-situation

Russia's trade ties with Europe,4 March 2014,Europe http://www.bbc.com/news/world-europe-26436291

EU relations with Russia, 1994 Partnership and Cooperation Agreement (PCA).http://eeas.europa.eu/russia/about/index_en.htmEuropean External Action Service (EEAS),Maja KOCIJANCIC EEAS Spokesperson, Office: BERL 03/319http://europa.eu/newsroom/highlights/special-coverage/eu_sanctions/index_en.htm

United States and EU Trade Sanctions Against Russia,Chandler Bentley Mrs. Straub AP Economics,March 31, 2015http://pewaukeeeconomics.blogspot.cz/2015/04/united-states-and-eu-trade-sanctions.htmlUS and EU Expand Economic Sanctions Against Russia, By Niles Williamson,Region: Europe, Russia and FSU, USA,Theme: Global Economy, US NATO War Agenda,In-depth Report: UKRAINE REPOR, Global Research, September 14, 2014 http://www.globalresearch.ca/us-and-eu-expand-economic-sanctions-against-russia/5401587U.S.-Russian trade relationship? There really isn't one, MARCH 18, 2014, 3:28 PM ESThttp://fortune.com/2014/03/18/u-s-russian-trade-relationship-there-really-isnt-one/U.S. imposes more Russian and Ukrainian sanctions,WASHINGTON | BY YEGANEH TORBATI,Thu Jul 30, 2015 3:11pm EDT http://www.reuters.com/article/2015/07/30/us-usa-russia-sanctions-idUSKCN0Q42H720150730U.S. Department of State, Ukraine and Russia Sanctions, March 6, 2014 http://www.state.gov/e/eb/tfs/spi/ukrainerussia/

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