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56 Opinion
bne June 2018
The Russian-German Foreign Trade Chamber has just conduct- ed a survey of 154 companies working in Russia and conclud- ed sanctions could cost these leading companies €1.5bn.
"Short-term losses are estimated by the survey participants in the current fiscal year in the hundreds of millions of euros, and may amount to €377mn." The medium-term losses will amount to at least €820mn, according to conservative esti- mates. In the worst case scenario, it may total almost €1.5bn, the report said.
This is just the direct cost of sanctions. When you start counting in all the secondary affects, like the bne IntelliNews calculation, you quickly get to a figure that is ten times the size. Both the Kremlin and Brussels have estimated the cost of the retaliatory agro-sanctions imposed on Europe by Russia at some €100bn in lost revenues, jobs and the like – a number that is based on the fall by a third in Russian-EU trade since the crisis began with the annexation of Crimea in 2014.
Unlike the US, Europe doesn't have a military-industrial economy but is dependent on free trade and profits. It can’t and won’t weather protracted military standoffs. It wants a compromise so it can go back to business. This puts it at odds with the US policy, which will drive a wedge in between the allies – something that Putin is well aware of and will exploit.
But at the same time Europe has signed up to the Cold War security doctrine where it sits under the US security umbrella so that it doesn't have to invest in its own EU standing army or hugely expensive nuclear weapons research. All these relation- ships are now changing and something will have to give.
And Germany bears the lion’s share of the sanction losses as Russia’s biggest European trading partner and the most heav- ily invested into the Russian economy.
German Chancellor Angela Merkel is due in Washington on April 27 to meet with Trump and is expected to argue strongly for scaling back or freezing the current sanctions war as, unlike the US, Germany is heavily exposed to the Russian economy.
In another parallel to the Roman analogy, the US is increasingly following a policy of “Carthago delenda est”
– Carthage must be destroyed. Even after the Romans won the second Punic war and imposed crippling reparations on the city, the Romans became obsessed with it and were just looking for a chance to go to war again and finish the job. The same jingoistic attitudes were prevalent as those today towards Russia. The Roman’s thought of Carthaginians as venal and vain, made them the butt of jokes and derogatory attitudes were the norm.
This was despite the fact that Rome became heavily dependent on Carthaginian high quality goods and later its abundant sup- plies of grain. (History repeats itself: Russia is now the world’s biggest exporter of wheat and expects exports to double this
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year.) The city flourished under the Roman yoke and was able to pay off its fine very quickly. When the Romans did finally destroy the Carthaginian empire, historians took that as the beginning of the fall of the Roman empire as the removal of a serious rival lead to arrogance and decadence that rotted the empire away from the inside.
“Russia doesn't have the US resources and will sink into stagnation unless deep structural reforms are put in place”
Russia is not in the same place as Carthage, which was a nation of entrepreneurs and artisans. But like Hannibal, Putin has shown himself to be a wily tactician and Russia has a few spectacular war-elephants like the Amator main battle tank, the S-400 surface-to-air anti-missile system and the SU-37 fifth gen- eration fighter planes. If you attack Russian forces it is not going to go well for you, even if you are going to eventually win.
However, Scipio Africanus defeated Hannibal by not engaging with him but harassing him and waiting for economic pres- sures at home to mount. Russia doesn't have the US' resources and will sink into stagnation unless deep structural reforms are put in place. Putin has just announced a $162bn spending spree on the social sphere, but few Russian observers have much confidence that Russia will suddenly transform itself
in such a way that this money is spent efficiently. Russia will defeat itself in the long run if Putin stays at the helm. The US just needs to bide its time (and perhaps wait for some better generals to come along).
bne has a full roster of columnists and opinion-makers, among them:
Mark Galeotti Liam Halligan Suna Erdem
Chris Weafer David Cecire Ben Aris
You can find all bne’s comment at
www.intellinews.com/opinion