segunda-feira, 10 de março de 2014

Ukraine: the cost of an economic war with Russia

By Admin 18:00

The leaders of the 28 Member States gathered in Brussels Summit last Thursday, and responded with an immediate suspension of the negotiations on the liberalisation of visas, as well as the diplomatic preparations for G8 Summit in Sochi, scheduled for the month of June. The threat of sanctions is palpable:

"Any attempt to destabilize the Ukraine, will have serious consequences in relations with the European Union and the Member States and in some areas with the Russian Federation," said the President of the European Council Herman Van Rompuy.

If the economic weapon is used with seriousness, many analysts reckon that all come out losing this arm wrestling. Europeans have less to lose than the russoa.

European exports to Russia constitute 1% of the GDP of 28, but exports from Moscow to the Union represent 15% of Russian GDP.

The Oxford Economics Research Institute estimates that an economic war between the two blocs will oblige the rising energy prices in Europe: over 15% for gas, plus 10% for oil, which can make back the eurozone GDP 1.5% up to 2015. The Russian side, an embargo on 80% of the energy sales will retrench 10% GDP until 2015 and the Oxford Economics Institute foretells the fall of the ruble and a sudden inflation.

Among the members of the European Union, some are more exposed. Carsten Brzeski, from ING Bank analyst, cites the example of Germany: "Germany relies heavily on imported Russian gas through Ukraine. This is the link. Many German companies also have invested in Russia because it was supposed to be a growing market. "

A third of the oil and gas consumed in Germany comes from Russia. About 6,000 German companies are deployed there and about 200 thousand jobs in Germany depend on trade with the Russians. Sufficient arguments to urge Berlin to convince Moscow to solve the problems at the negotiating table.

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