Russia retaliates

The Russian government's decision to adopt a tit-for-tat policy and ban the import of Western agriculture products (fruits, vegetables, meat, fish, milk and dairy products) from those countries which have imposed non-trade sanctions against Russia has raised concern in several European capitals and Canada though not the US with minimal overall reliance on farm exports as a percentage of total exports to Russia. The total impact of this sanction on Western economies (particularly the European Union) is estimated at a little over 9 billion dollars. Impact on some of the countries is estimated as follows based on their exports to Russia in 2013: Norway 1158 million dollars, Poland 1122 million dollars, US 838 million dollars (mainly Kinder products and Wrigley's gum), Spain 794 million dollars, Netherlands 794 million dollars, Germany 781 million dollars and UK only 58 million dollars.
The West could not understandably agree to sanction Russian major export item to the European Union namely gas as it was acknowledged that those amongst the 28 countries who relied on gas imports from Russia would not be able to quickly and easily find a substitute. This reflects the obvious objective of the sanctions: not cripple the economies of the sanctionees but the sanctioned. Be that as it may, there is a talk of the EU proactively applying existing rules relating to say money laundering on Russian companies/businesses considered to be operating in a non-transparent manner. However, Russia too has been proactively engaged in diversifying its client base. This calendar year Russia signed a deal with China committing to a lower price in exchange for China extending a 50 billion dollar loan for the development of gas fields and the construction of the pipeline by Russia up to the Chinese border. The two countries also agreed to deal in their currencies instead of in dollars thereby weakening the hold of the US over all-dollar denominated trade deals, albeit by a very small amount compared to the existing total world trade in dollars.
Thus Western sanctions on Russia to date are non-trade related and include: (i) suspension of G-8 summit in Sochi, Russia, (ii) suspension of Russian OECD membership, (iii) suspension of EU-Russia talks scheduled to ease visa restrictions between the two, and (iv) asset freeze of Russian individuals and companies held responsible for undermining Ukrainian democracy. Mid-July US President Barack Obama announced further sanctions including on the Russian defence industry but officials stated that the penalties fell far short of fully cutting off Russian sectors - a step that the Obama administration stated it was holding in reserve in case Moscow decides to launch a full scale invasion of the Ukraine.
Additionally the US has targeted two major Russian financial institutions, Gazprombank OAO and VEB, and two Russian energy firms, OAO Novatek and Rosneft, by limiting their access to the US capital markets. Gazprom it may be recalled had indicated an interest in supporting the Iran- Pakistan (IP) gas pipeline project, however, the threat of US sanctions on Pakistan, a major aid donor to Pakistan as well as a major supporter of proposed lending to Pakistan by multilaterals, has so far led to delays in the implementation of the project. Analysts however, point out that while Western sanctions against Gazprom raise the prospect of greater leverage by Pakistan with respect to implementing the IP project yet, if past precedence is anything to go by, it is highly unlikely that the PML-N government would use this leverage either in negotiations with the US or Russia.
To conclude it was no doubt rather naïve of Western countries not to take account of retaliatory measures after all Russia is not a small country like Iran where the capacity to retaliate is severely limited especially if their major export earner like oil is effectively sanctioned. Thus while Iran's fuel sales could easily be sanctioned as other countries would have met the shortage yet Russian pipelines supplying gas to Europe cannot be so quickly replaced.