EU—Russian Trade Relations in Light of Sanctions and Russia’s Import Measures

Russia’s Extremely Protectionist Trade

Unfortunately, despite joining the WTO, Russia’s trade policy is still protectionist. Russia has not honoured many responsibilities it accepted upon joining the WTO and has thereby significantly damaged the EU economy. As a result, the EU has already initiated four trade disputes against Russia in the WTO.
The situation has been further complicated by the fact that, in 2010, Russia entered into a customs union with Kazakhstan and Belarus (the Eurasian Customs Union), and then extended it to include Armenia and Kyrgyzstan at the beginning of this year. The purpose of the union is to bring the economic and trade policies of its member states closer to each other; however, until now, its other members have followed a considerably more open trade policy than Russia, and have not joined the measures restricting Russian trade.
The European Commission’s report on protectionism from June 2013 to June 2014 placed Russia at the forefront of countries that have applied the most restrictive measures (without taking into account the counter-restrictions against the EU’s sanctions).
Some of these measures include raising import duties on certain products above the norms that Russia committed to putting into practice when it joined the WTO, prohibition on the importation of livestock and pork (imposed in 2014, and seriously harming Estonian producers among others), unjustified export restrictions on raw materials and various technical restrictions on products. All in all, Russia imposed 31 trade restrictions during the period.
The extensive prohibition on imported agricultural products enforced by Russia in August 2014 can therefore be seen as a continuation of an already familiar trend, although on a bigger scale.

Impact of Sanctions on Trade Relations between the EU and Russia

When analysing the impact of EU sanctions, it must be first understood that the purpose of sanctions is always political and that they are imposed only when all other political and diplomatic measures have been to no avail.
The EU resolution adopted in July 2014 to impose sanctions, including trade sanctions, against Russia was directly tied to Russia’s actions in Ukraine—annexing the Crimea and destabilising the situation in eastern Ukraine.
Countries adopt trade sanctions fully aware that they may backfire on their own economies, but do so in order to achieve important political goals. In the current situation, EU sanctions have been well directed—they are planned to have a maximal impact on Russia and a minimal negative impact on EU member states.
The measures have been enforced in a balanced manner in four sectors: energy, finance, the defence industry and sensitive technologies.
Today, we can say that the sanctions have definitely started to have an impact, although they need to be considered along with other factors that influence the Russian economy. The most important of these have perhaps been the decrease in oil prices on the world market and the drastic fall in the value of the rouble. The latter has been further exacerbated by sanctions in the finance sector, which have drastically restricted Russia’s access to financial markets. At the same time, it must be recognised that Russia’s economic growth was already slowing before the imposition of sanctions, an essential reason for which is the failure to perform structural reforms.
Whether the sanctions become harsher or lighter in the future depends directly on the political steps taken by Russia.

Russia’s Ban of Agricultural Imports

 

This article was published in ICDS Diplomaatia magazine.