Several EU countries, including Austria and Hungary, have expressed interest in lifting, or at least softening, sanctions, as they can no longer afford to miss out on trade with Russia. Countries that have faced difficulty offsetting lost trade opportunities are Finland, Poland and the Baltic states—Latvia, Estonia and Lithuania. The French parliament recently adopted a resolution to urge Brussels to drop all sanctions. Italy’s Upper House of Parliament, meanwhile, approved a resolution opposing any automatic renewal of sanctions.
Britain’s exclusion from any future policy decision-making, then, could help Moscow’s chances to renegotiate terms.
In the long term, this bodes well for Russia’s economy, which has been hammered by not just sanctions but also falling oil prices during the last two years. In 2013, energy accounted for 70 percent of all exports, with crude alone representing a third. What’s helped keep oil producers profitable is the weakened ruble, which has lowered labor costs while making exports more competitive.
Double Whammy: Sanctions and Low Oil Prices
Estimates vary as to which has done more damage to the country’s currency—sanctions or the drop in Brent oil. As I’ve pointed out before, there’s a clear correlation between the ruble and oil prices.
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