News / Europe

Russian Ties, Trade Lie Behind EU Sanctions Rift


Germany and Italy have the most to lose if the European Union makes good on its threat to impose harsher sanctions on Moscow, while Britain's overseas territories are soaking up the lion's share of capital streaming out of Russia.

The picture emerging from United Nations and European Union data shows the impact of restricting trade with Russia would be far from even, with Germany dwarfing others' exposure and those urging sanctions loudest, such as Sweden, having less at stake.

That makes an EU plan to consider limiting Russian access to European defense and energy technology more difficult, despite pressure from the United States after the downing of a Malaysian airliner over the conflict zone in eastern Ukraine.

Wary of antagonizing its main gas supplier, the EU has used travel bans and asset freezes so far in reaction to Russia's annexation of Crimea and support for separatists in Ukraine.

Ministers agreed on Tuesday those measures may be widened if Moscow does not cooperate with an investigation into the plane crash and fails to stop weapons flowing into the country.

Limiting trade would be damaging because the 28-nation EU sold goods worth 120 billion euros ($161 billion) to Russia last year, even if that was only 7 percent of the bloc's annual exports, according to the EU statistics office Eurostat.

Germany, Europe's biggest economy, accounted for one-third of sales to Russia, around 36 billion euros. Many of those goods could be restricted by sanctions: manufactured products including those used in defense and energy.

EU governments are split over tougher sanctions, largely depending on the closeness of their ties with Russia. Germany is the swing state given its position at the heart of Europe and as its weight as the EU's most populous country.

Britain, Poland and Sweden lead a group pushing for economic sanctions, and whose combined total exports to Russia are less than the size of those of Germany.

Some 6,200 German firms are active in Russia with 20 billion euros [$27 billion] of investments there, while around 300,000 German jobs are dependant on trade with Russia, according to Germany's Committee on Eastern European Economic Relations.

“More sanctions increase the price all of us have to pay for this conflict,” Eckhard Cordes, its chairman, told Reuters.

HeidelbergCement, which does business in Russia, echoed that sentiment and a spokesman for the company said that while it would accept sanctions, “economically there will only be losers because both sides will suffer damages”.

Still, the Baltic countries, which won their independence from the Soviet Union two decades ago, are the most vocal about the need for sanctions against Russia despite strong trade ties.

Almost three-quarters of Latvia's drinks and tobacco exports go to Russia, while Lithuania sells a third of its food and live animal there. But the Baltics are eager to diversify away from Moscow. Lithuania will join its Baltic neighbors Latvia and Estonia in the euro zone from next year, cementing a shift westwards.

$94-Billion Money Trail

Italy is among the states most strongly resisting tougher restrictions on Russia, along with Greece and Cyprus.

Italian exports to Russia were second only to Germany's last year at nearly 11 billion euros, double those of Britain and larger than the 8 billion euros of the Netherlands, which has shifted to the pro-sanctions camp after 193 of its citizens were killed in the plane disaster.

The Netherlands, a nation of 15 million, has an outsized share of imports from Moscow and foreign direct investment flows to Russia because of its position as an oil and commodities trading hub and a tax-efficient base for offshore corporations.

Much of the Italian sales were manufactured goods, transport machinery and chemicals - the kind of sophisticated products Russia's raw materials-dominated economy needs.

“Sanctions are always a problem both for those who are subjected to them and those who impose them,” Italian Economy Minister Pier Carlo Padoan told reporters in Brussels.

Italy's allies include southern European countries such as Cyprus, which stands to lose from sanctions because of the billions of euros Russian oligarchs have invested there.

Of $94 billion in outward foreign direct investment by Russian residents in 2013, $11 billion ended up in Cyprus, according to U.N. and World Trade Organization data.

Cyprus, where light regulation and cultural ties through Orthodox Christianity have long attracted the capital and savings of Russians, was only second to the British Virgin Islands, which took in $61.7 billion last year.

Wealthy Russians took a hit when the euro zone imposed losses on big bank depositors in return for a 10 billion euro bailout of Cyprus last year after a banking meltdown.


You May Like

Syrian Rebels Poised for Anti-Russia Collaboration

Forty-one insurgent groups issue joint statement vowing retaliation for Russian air offensives More

Political Maneuver Revives Export-Import Bank's Chances

Parliamentary tactic gets bill out of committee, but it faces opposition in the Senate More

Beijing Warns US on S. China Sea Patrols

Warning follows news reports Thursday that US military is planning to sail warships close to artificial islands Beijing has been aggressively building More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
House Republicans in Chaos as Speaker Favorite Withdrawsi
Jim Malone
October 09, 2015 12:32 AM
The Republican widely expected to become the next speaker of the House of Representatives shocked his colleagues Thursday by announcing he was withdrawing his candidacy. The decision by Majority Leader Kevin McCarthy means the race to succeed retiring Speaker John Boehner is now wide open. VOA National Correspondent Jim Malone reports.

Video House Republicans in Chaos as Speaker Favorite Withdraws

The Republican widely expected to become the next speaker of the House of Representatives shocked his colleagues Thursday by announcing he was withdrawing his candidacy. The decision by Majority Leader Kevin McCarthy means the race to succeed retiring Speaker John Boehner is now wide open. VOA National Correspondent Jim Malone reports.

Video German, US Officials Investigate Volkswagen

German officials have taken steps to restore some of the reputation their car industry has lost after a recent Volkswagen diesel emissions scandal. Authorities have searched Volkswagen headquarters and other locations in an effort to identify the culprits in the creation of software that helps cheat on emission tests. Meanwhile, a group of lawmakers in Washington held a hearing to get to the bottom of the cheating strategy that was first discovered in the United States. Zlatica Hoke reports.

Video Why Are Gun Laws So Hard for Congress to Tackle?

Since taking office, President Barack Obama has spoken out or issued statements about 15 mass shootings. The most recent shooting, in which 10 people were killed at a community college, sparked outrage over the nation's gun laws. But changing those laws isn't as easy as many think. VOA's Carolyn Presutti reports.

Video Hungary Criticized for Handling of Refugees

Amnesty International has accused Hungary of breaking multiple international and European human rights laws in its handling of the refugee crisis. As Henry Ridgwell reports, thousands of migrants and refugees continue to travel through the Balkans to Hungary every day.

Video Iraqi-Kurdish Teachers Vow to Continue Protest

Sixteen people were injured when police used tear gas and rubber bullets to disperse teachers and other public employees who took to the streets in Iraq’s Kurdish north, demanding their salaries from the Kurdish Regional Government (KRG). VOA’s Dilshad Anwar, in Sulaimaniya, caught up with protesting teachers who say they have not been paid for three months. Parke Brewer narrates his report.

Video Syrian Village Community Faces Double Displacement in Lebanon

Driven by war from their village in southwestern Syria, a group of families found shelter in Lebanon, resettling en masse in a half-built university to form one of the biggest settlements of its kind in Lebanon. Three years later, however, they now face being kicked out and dispersed in a country where finding shelter as a refugee can be especially tough. John Owens has more for VOA from the city of Saida, also known as Sidon.

Video Bat Colony: Unusual Tourist Attraction in Texas

The action hero Batman might be everyone’s favorite but real bats hardly get that kind of adoration. Put more than a million of these creatures of the night together and it only evokes images of horror. Sarah Zaman visited the largest urban bat colony in North America to see just how well bat and human get along with each other.

Video Device Shows Promise of Stopping Motion Sickness

It’s a sickening feeling — the dizziness, nausea and vomiting that comes with motion sickness. But a device now being developed could stop motion sickness by suppressing certain signals in the brain. VOA’s Deborah Block reports.

Video Making a Mint

While apples, corn, and cranberries top the list of fall produce in the US, it’s also the time to harvest gum, candy, and toothpaste—or at least the oil that makes them minty fresh. Erika Celeste reports from South Bend, Indiana on the mint harvest.

Video Activists Decry Lagos Slum Demolition

Acting on a court order, authorities in Nigeria demolished a slum last month in the commercial capital, Lagos. But human rights activists say the order was illegal, and the community was razed to make way for a government housing project. Chris Stein has more from Lagos.

Video TPP Agreed, But Faces Stiff Opposition

President Barack Obama promoted the Trans-Pacific Partnership on Tuesday, one day after 12 Pacific Rim nations reached the free trade deal in Atlanta. The controversial pact that would involve about 40 percent of global trade still needs approval by lawmakers in respective countries. Zlatica Hoke reports Obama is facing strong opposition to the deal, including from members of his own party.

Video Ukranian Artist Portrays Putin in an Unusual Way

As Russian President Vladimir Putin was addressing the United Nations in New York last month, he was also being featured in an art exhibition in Washington. It’s not a flattering exhibit. It’s done by a Ukrainian artist in a unique medium. And its creator says it’s not only a work of art - it’s a political statement. VOA’s Tetiana Kharchenko has more.

VOA Blogs