Why Russia stays defiant in face of US sanctions

Dar es Salaam. When US President Donald Trump and his Russian counterpart Vladmir Putin met in Helsinki four weeks ago, there was renewed hope from some quarters that relations between the two countries could improve. That hope lasted briefly, and by last week, tension had risen a notch higher.

On Wednesday, Washington announced it would impose fresh sanctions on Russia accusing Moscow of using a nerve agent against a former Russian double agent, Sergei Skripal, and his daughter, Yulia, in Britain.

Russia has since labelled the new US sanctions draconian saying the allegations that it used the ‘Novichok’ nerve agent against a UK citizen who was a former spy and his daughter were far-fetched and unrealistic.

Kremlin officials say such unfriendly decisions are difficult to associate with the atmosphere that prevailed at the meeting between the two presidents in Helsinki on July 16.

Those close to both camps admit that though the talks between the presidents were not easy, they were constructive.

It is believed that the US actions were after they received ‘persuasive information’ from the UK that Russia was behind the attack and was now acting on the basis of “objective facts” and “legal requirements”.

The new ‘draconian’ sanctions is set come into effect on 22 August (next week) and would be followed by much more sweeping measures, such as suspending diplomatic relations and revoking Aeroflot landing rights, if Russia does not take “remedial” action within 90 days.

According to analysts, Moscow is not expected to yield to this pressure and the kind of response required by the US, which among others includes opening up Russian scientific and security facilities to international inspections to assess whether it is producing chemical and biological weapons in violation of international law.

The new sanctions involve the export of a long list of equipment deemed to be sensitive on national security grounds, including gas turbine engines, integrated circuits, and calibration equipment used in avionics.

Defiance

Russian President remains adamant and positive because he believes such sanctions and restrictions are harmful for everyone, those who initiate them, and those it is directed towards.

“I want to assure you that Russia has overcome all the difficulties connected with external restrictions. A few years ago it was not easy for us, bearing in mind that we simultaneously faced a substantial – two-fold – drop in prices on the goods of our traditional exports,” he said.

He sounded confident, Russia according to him have not only maintained macroeconomic stability, but also strengthened its economy.

Vladimir Gutenev, the head of the State Duma commission for legislative support of the defense industry enterprises, also maintains that the Russian defense industry complex will not suffer because of a possible ban on the export of electronic devices from the US, since Russia has a large collection of spare parts.

A blessing in the making

But as the world waits for the new sanctions to kick off sources in Moscow believe this could be a blessing in disguise for the new sanctions are most likely to stimulate Russian economy.

Russia’s external debt in comparison in 2015 fell from $730 billion to $560 billion which is equivalent to 30 per cent of the gross national product.

Comparatively, Russia carries a lesser than the US and the EU whose debts fluctuate at around 100 per cent whereas Germany, France, and Britain are at 160, 230 and 390 per cent respectively.

The past three years the Russian economy was punctuated by two major events - the war in Ukraine and the oil crisis.

Economists and financial analysts were confident that the investment-technological “boycott” of Russia and cheap oil would negatively affect the financial situation of the country.

Indeed, external factors had a negative impact on individual sectors of industry, agriculture and services.

At the same time, one cannot help but notice that the so-called “crisis” is fraught with certain advantages.

Russia continues to strive for world energy markets. This is evident not only in the gas projects promoted by Moscow but also in terms of oil production.

In the spring of 2015, Russia came out on top, surpassing Saudi Arabia. According to the data of the Central Dispatch Office of the Fuel and Energy Complex, Russia produced 45.3 million tons in May 2015, which was 1.6 per cent more than in May 2014.

Average daily production is 10.6 million barrels, the Saudis produce 10.25 million barrels

In addition, Russia was able to compensate for the decrease in exports to Europe through an increase in supplies to Asia.

Russian oil outstripped Angolan oil in the Chinese market and is second only to Saudi oil. Over the period January-June, the increase in exports was 27 per cent compared to 2014.

Against the background of a decline in imports of goods and services from Europe, the balance of payments is improving. According to ‘Russia Insider’, the surplus for the year 2015 was almost $ 20 billion. It remains an interesting prospect, especially with the fact that Moscow’s stand in the face current sanctions threats remains unwavered.

And should Putin’s words be put into context, perhaps there are more countries that are likely to suffer from the sanctions than just Russia.