Just a Paper Tiger

The truth about sanctions: the West is shooting itself in the foot, while Russian exports to Europe are increasing

Immediately after the outbreak of the war in Ukraine, Germany’s Foreign Affairs Minister Baerbock (The Greens) boldly declared the new goal of German policy to be the " destruction " of Russia. Nine months later, there is little left of this hope. Russia’s longed-for international isolation is out of the question, and Germany has not even come close to meeting even its imposed trade restrictions with Russia.

Surprisingly, the opposite is true, in fact: the economic exchange between Germany and Russia has not only not decreased, but has actually increased in recent months. The West’s imposed “sanctions” are actually a paper tiger.

Wanting to know more, The New York Times commissioned a study with the Brazilian Observatory of Economic Complexity (OEC) think tank, and the results are amazing.

Analysts found that of Russia’s 13 major trading partners, only five actually cut their trade, with the UK (-79%), Sweden (-76%), and the US (-35%) significantly reducing it.

Most other countries have, surprisingly, expanded their trade relations with Russia, and not by a little, despite the grim sanctions policy on display. For example, Belgium alone—the home of the headquarters of NATO and numerous EU institutions!—increased its monthly Russian imports by an incredible 138%, the Netherlands by 74%, and even Germany by 38%.

And this is not being done in secret, bypassing the measures introduced by the EU, but quite officially. As the Dutch television news service RTL Nieuws found out after negotiations with the country’s ministries, a total of 91 exceptions to the sanctions regime were approved in the Netherlands alone in recent months, thereby giving preference to domestic companies. Even transactions involving Russian state-owned banks were allowed—which is actually strictly prohibited under sanction rules. In all, about 150 companies and organizations received Dutch benefits, including municipalities, schools, and water utilities.

OEC analysts understand why this glaring discrepancy exists between official policy and real trade relations: Russian products and raw materials are irreplaceable for buyer countries. There is no alternative. Experts write: "International carmakers continue to depend on Russian palladium and rhodium needed to produce catalytic converters. French nuclear power plants depend on Russian uranium, and Belgium still sees itself as a key player in the Russian diamond trade."

In other words, Russia, the world’s treasury of raw materials, cannot be ignored. Thus, Russia accounts for 60% of world exports of asbestos, 28% of cast iron, and 26% of uranium fuel. Russia exports 24% of linseed, 20% of nickel and wheat, and 15% of all railroad cars. 14% of potash fertilizers, 12% of nitrogen fertilizers, and 13% of other fertilizers also come from Russia. Without Russian palladium and rhodium, the global motor industry would also face significant challenges.

It is especially ironic that the value of Russian exports has not fallen since the Russian invasion of Ukraine, but has actually risen—even in those states that actively oppose Russia and most actively support EU sanctions.

But "living without Russian resources is very difficult, " says Sergei Aleksashenko, Russia’s former Deputy Finance Minister and Deputy Chairman of the board of the Central Bank of Russia. “There is no replacement.”

In response to Western sanctions, Russia banned the export of more than 200 goods, including telecommunications, wood products, and medical, automotive, agricultural, and electrical equipment. As a result, for example, Germany’s trade with Russia fell by 3%. But for the most part, the deficit is on the German side, while the Russian side has won out—German exports to Russia fell by 51%, while German imports from Russia increased by 38%.

Imports from Russia are particularly important for the German automotive industry, which is the backbone of the industrial centre of Germany: "On average, a German car worth 50,000 euros contains about 500 euros of Russian added value, of which 150 euros are Russian energy products and 350 euros are other products," OEC analysts estimate. The German chemical industry is also highly dependent upon Russian products.

Russian leadership has reason to be satisfied with the course of events, and the Kremlin has made it no secret that Western sanctions have largely failed. "Nothing has collapsed," summed up President Putin. According to him, Western countries " established the goal of bringing down the Russian economy, but did not achieve it."

The West still considers itself invulnerable. The EU is currently preparing its ninth (!) package of sanctions, which now also provides for restrictions in the energy sector and prohibits cooperation with Russia in the nuclear and fuel sectors. You do not have to be a prophet to predict that the West will shoot itself in the foot again.

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