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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, Sept. 20


Starting on Sept. 18 and ending tomorrow is the Extreme Fantasy Wakeboarding Festival in Sunpark by Sredny Suzdalskoye lake in the Ozerki region of the city.


Those after something more laid back can instead head to Jazz and Wine night at TerraVino with legendary jazz guitarist Ildar Kazahanov. 12/14 Admiralteyskaya Emb.



Sunday, Sept. 21


Learn more about African culture and get some exercise during today’s “Djembe and Vuvuzela,” a bike ride starting in Palace Square that includes several stops where riders can listen to the music of Africa or watch short films about the continent. The riders plan to set off at 4 p.m. and all you need to join is a set of wheels.



Monday, Sept. 22


Do you love puppetry? If so, then be sure to go to BTK-Fest, a five-day festival that starts on Sept. 19 celebrating the art. Contemporaries from France, Belgium, the U.K. and other countries will join Russian artists to put on theatrical performances involving a variety of themes, materials and eras. Workshops and meetings are also scheduled for a chance to discuss the artistic medium in further depth.



Tuesday, Sept. 23


Marina Suhih, Director of the External Communications Department at Rostelecom North-West, and Yana Donskaya, HR Director for Northern Capital Gateway are just some of the confirmed participants of today’s round table discussion on “Interaction with Trade Unions” being hosted by SPIBA. Confirm your attendance with SPIBA by Sept. 22.


Kino Expo 2014, an international film industry convention, will be at LenExpo from today until Sept. 26. The third largest exhibition of film equipment in the world, the expo focuses on not only Russia but former Soviet republics as well.



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