EU and US Russian sanctions explained

What are the new sanctions and how will they affect Russia, the EU and everyone else involved? And is our gas about to be cut off? We have the answers.

by Emma Haslett
Last Updated: 03 Dec 2014

Er, I thought we'd already imposed sanctions...

Kind of: earlier this month, the US introduced sanctions targeted specifically at dozens of companies, including Rosneft (the major oil producer), Gazprombank (Russia's third-largest bank) and Kalashnikov, the gun maker. The EU followed suit by vaguely mentioning 'entities' helping Ukrainian separatists, and 'providing material and financial support' to those in charge of the annexation of Crimea.

I see. So what do these new ones do?

New sanctions, to be officially published by Thursday night when they go into effect, target key sectors: finance, defence and energy, which means access Russia's state-owned banks would be prevented from issuing stock or bonds in Europe, and arms deals (except the first of two €1.2bn French-built Mistral helicopter carrier ships, which has already been half-built and will be delivered as expected).

The US has gone for its finance sector, with the Bank of Moscow, the Russian Agricultural Bank and VTB Bank all on its hitlist.

Has anything been left off the list?

Yep: in fact, what's been left out is almost more telling than what's been put in. Namely, exports to the Russian gas industry. That's mainly because European politicians are terrified of the industry retaliating and cutting off the gas supply to Europe: at the moment, Russia supplies 30% of the EU's gas, around 70% of the UK's supply. So you can see why they're worried...

What have the sanctions done to Russia so far?

Well, yields on gilts have gone sky-high since the downing of MH17, topping 9% for the first time since the darkest days of the financial crisis in the past few days. Meanwhile, the MICEX has fallen more than 9% in the past month, and last week the International Monetary Fund downgraded its 2014 growth forecast for the country to 0.2%, down from 1.3% back in April.

Ok. And what about the UK?

On Tuesday BP warned that sanctions might hit its profits (given that it owns a fifth of state-backed oil giant Rosneft, that's pretty likely). Share prices of other London-listed companies operating in Russia have fallen, too: property company Raven Russia is down 10% in the last month, while events organiser ITE Group has fallen 15% and this morning International Airlines Group, the parent company of British Airways, dropped 0.12%, while the FTSE 100 fell 0.2%.

Incidentally, Carlsberg's share price was down 2.12% this morning. It has a 37% share of Russia's booze market, so shareholders are presumably worried there will be a lot less celebrating going on...

And what do politicians say about all this?

New foreign secretary Philip Hammond has rather been thrown in at the deep end: this morning he said the UK will almost certainly pay an economic price for the sanctions, but that other EU countries will endure similar 'pain' and that 'Russian aggression' needs to be cut.

'The sanctions package is designed to hurt Russia more than it hurts us,' he told BBC Breakfast this morning. Well, quite.

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