Upping the ante, the European Union and the US have announced new sanctions against Russia aimed at forcing Moscow to step back in the Ukraine conflict. The sanctions are the harshest measures against Russia since 1991 and have raised fears of a new Cold War.
The new sanctions cover sectors such as oil, defence and banking. They restrict sales of arms and equipment for the oil industry, while Russian state-owned banks are barred from raising money in Western capital markets.
The sanctions will have not only a financial impact but also a political one. They will force Moscow to look for new friends and strengthen ties will old allies.
China has its own interests in not letting Russia crumble under pressure from the west. Russia’s fall in a world where the US is trying to increase its influence will put pressure on China. China would not like the world to move to a stage where the US dictates terms to other countries. Along with China, Argentina, India, Iran, South Africa and some other African emerging economies may gain prominence in Russia’s foreign policy.
On the economic front, these sanctions will hurt not only Russia but also impact EU economies. The world’s biggest exporter of natural gas and second biggest exporter of oil, Russia is Europe’s biggest source of energy and a major trading partner.
A day after the new sanctions were imposed, the Russian foreign ministry said that the new wave of Western sanctions would translate into higher energy prices for European consumers.
However, it is beyond doubt that the sanctions will impact Russia more than the west. Observers are of the opinion that sanctions might apply the brakes on Russia’s economic growth. Previously, Russia had forecast 1 percent growth in gross domestic product this year — although the International Monetary Fund this month downgraded its forecast to 0.2 percent, citing capital flight and falling investment amid western economic pressure.
But the reaction in Moscow after the new sanctions indicates that Russia will not bow down. The Bank of Moscow said in a statement that it was focused on its domestic market, and its business “wouldn’t suffer at all from the imposed sanctions”.
Though the outcome of the new sanctions will become apparent in the days to come, one thing is clear — with Russia refusing to blink first in its confrontation with the West, a solution to the stand-off is unlikely in the near future•