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Without EU Cash, Russian Business Is Sunk

Published: August 1, 2014 (Issue # 1822)




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Before the downing of Malaysia Airlines Flight MH17, it was hard to see how the Europeans were going to implement serious economic sanctions against Russia. But the shooting-down of a civilian airliner has been a political game-changer and has rapidly pushed formerly reluctant countries like Germany and France to a position that was widely considered impossible not even a full month ago.

It is possible, of course, that the Europeans will lose their nerve. Stranger things have happened than the European Union changing course at the last minute, and nothing prevents the sanctions from being softened a week, a month or, God forbid, even a year down the line.

Given the political reality, however, and the Russian government's continued and loud insistence that it has nothing to apologize for, it now seems probable that Russia will be faced with a sanction regime for the short and medium terms. I'd like to forecast a reduction in tensions in Ukraine because that country has suffered enough already. But over the past five months, every time it appeared that things had finally started to get better, they rapidly relapsed.

So what will the sanctions do? The consensus view among most economists is that they will be a serious, if not catastrophic, problem.

In particular, Western analysts express broad agreement that the latest sanctions will substantially limit Russian companies' ability to borrow and will make that borrowing much more expensive. After all, it is hard to structure a deal when no one knows whether the bank funding it will soon be on a Western blacklist.

The Russian finance sector is largely at a standstill already, a combination of the sanctions themselves and the pervasive uncertainty they have inspired. Russia has benefited greatly from its ability to access long-term credit in Western financial systems, particularly London, and that access is now sharply constrained.

Many people — particularly those who work in, or are sympathetic to, the Russian government — argue that the sanctions will actually help Russia by forcing it to more intensively develop certain areas of its economy.

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ALL ABOUT TOWN

Saturday, Nov. 29


Cats, dogs, birds, rodents and reptiles are just some of the things that will walk and crawl at Lenexpo convention center this weekend as part of Zooshow, a two-day exhibition featuring not only man’s best friends but a four-legged fashion show, as well as a food fair that will help pet owners find out more about which kibbles are best for their hungry pets.



Sunday, Nov. 30


Remember the 75th anniversary of the beginning of the Russo-Finnish war in 1939 during today’s reenactment titled “Winter War: How it Was.” More than 200 people will take part in recreating the opening salvoes of the battle for the north in Kamenka, a small village situated between Vyborg and St. Petersburg, using authentic equipment and vintage vehicles from the era. The faux battle begins at 2 p.m.



Monday, Dec. 1


Serbia filmmaker Emir Kusturica is the featured guest this evening at the Lensovet Palace of Culture the Petrograd Side. Fans of the director will get the chance to watch his movie “Black Cat, White Cat,” as well as ask questions about his award-winning filmography. Tickets for the event, which starts at 7 p.m., start at 2,000 rubles ($42.50).



Tuesday, Dec. 2


Today is the final day of “Takoy Festival,” a three-week program of plays based on the works of Dostoevsky, Remarque and other famed European writers, whose work is transcribed for theatrical performances. Tonight’s festival finale is “Fathers and Sons,” a two-act drama staged by the Novosibirsk Academic Drama Theater based on Turgenev’s classic about familial relations.



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