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Two years have now elapsed since the illegal annexation of the Crimean Peninsula to Russia. The operation was completed in two weeks, and was followed by hostilities in Eastern Ukraine. Once again there is a war in Europe, which is in causal connection with the Russian operations in Georgia in 2008.
150316, Terhi Hakala

Terhi Hakala, Director General, Department for Russia, Eastern Europe and Central Asia, Ministry for Foreign Affairs of Finland.

The European Union, the United States and numerous western countries responded promptly by imposing sanctions on Russia.

At the first stage, a travel ban was issued for persons involved in the decision-making process leading up to the Ukrainian crisis. After a Malaysian Commercial Aircraft was shot down in Ukrainian airspace in July 2014, sectoral economic sanctions were imposed. The first set of sanctions included the embargo of military equipment and dual-purpose products, as well banning Russian military technology companies from access to the financial markets. The list also comprised the oil industry and certain products used in Arctic, deep-water and shale oil projects, including the associated support, brokering and financial services. In response, Russia issued its own “ black lists” of persons banned from entry to the country, and prohibited imports of western food products.

There are ongoing discussions on various fora about the benefits of the sanctions and, most importantly, whether we are shooting ourselves in the foot by imposing them in the first place. And what kind of impact, if any, have the sanctions had on the settlement of the Ukrainian conflict? In particular, those opposing the sanctions wish to belittle their impact. According to Russia, the impact has been rather insignificant. A few months back, Russia nevertheless imposed in a spectacular manner sanctions on Turkey in response to downing a Russian fighter.
It is quite true that calculating the net effect of the economic sanctions with accuracy is a demanding task, unless one delimits the scope of assessment to the level of individual sectors. Furthermore, the overall assessment should, apart from mere economic growth figures, also include the potential foreign investments in Russia that were never executed because of the sanctions. In recent years, the trade volume of the EU zone with Russia has dropped on average by approximately one third. The primary reasons, however, are the deep recession facing the Russian economy, arising from structural problems, which started already before the Ukrainian crisis, and the subsequent fall of oil prices. Any economic sanctions have an effect with a certain delay, and at this stage the most clearly affected sectors are the banking and financial sectors.

Perhaps the most visible individual action related to the embargo of military equipment was France’s decision to withdraw from delivering two Mistral class assault ships to Russia. A great many other trade deals are now awaiting better times, given the modernisation needs of the Russian armed forces. Russia cannot develop the armaments industry without western technology. For Finland, the overall effects of the sanctions have been rather minimal. Individual companies, however, can be affected drastically. The scale of Finnish trade with Russia in the defence sector has been so small that the impact of the sanctions has been insignificant. The same holds true concerning dual-purpose products intended for military or paramilitary purposes. In contrast, the countermeasures implemented by Russia have a significant impact on the Finnish food products sector, especially the dairy industry. The Finnish business community, however, has largely understood and accepted the basic purpose of the sanctions. For almost every Finn, it is an established fact that the high risks inherent in the Russian trade actualise from time to time.

The meaningful purpose of sanctions is always primarily political. Russia has violated international rules by invading Ukraine and annexing the Crimean Peninsula. The sanctions seek to influence Russia in order to find a peaceful solution. The unified front of the European Union remains intact, while other countries follow the example set by the EU. When considered as a whole, the Syrian situation, the waves of immigrants and the internal problems of the EU will quite evidently pose new challenges to any future decisions adopted concerning the sanctions. The objective is to build peace in Ukraine and to restore the country and its economy. The lack of a permanent ceasefire or the slow pace of internal reforms in Ukraine do not mean that the sanctions do not have any effective impact or that the sanctions should be removed any time in the near future. The grounds for the sanction decisions remain valid still today.