Sanctions Removal

 

Article 8:

Removal of sanctions

Subject to agreement and implementation of the above articles (1-7), and demonstration of good faith by all parties, sanctions connected with the war in Ukraine will be removed.

*****

US/NATO giving Russia security guarantees, and the west removing the sanctions are the only two attractions of the peace treaty. Russia has talked about import substitution (Russian producers replacing western producers), authorized parallel imports (smuggling via Armenia, Georgia or other third countries), greater trading relationships with China, India and other neutral countries. None of these measures

 

This is what a July 2022 paper (Business retreats and sanctions are crippling the Russian economy) from the Yale university writes.

From our analysis, it becomes clear: business retreats and sanctions are catastrophically crippling the Russian economy. We tackle a wide range of common misperceptions – and shed light on what is actually going on inside Russia, including:

- Russia’s strategic positioning as a commodities exporter has irrevocably deteriorated, as it now deals from a position of weakness with the loss of its erstwhile main markets, and faces steep challenges executing a “pivot to Asia” with non-fungible exports such as piped gas

- Despite some lingering leakiness, Russian imports have largely collapsed, and the country faces stark challenges securing crucial inputs, parts, and technology from hesitant trade partners, leading to widespread supply shortages within its domestic economy

- Despite Putin’s delusions of self-sufficiency and import substitution, Russian domestic production has come to a complete standstill with no capacity to replace lost businesses, products and talent; the hollowing out of Russia’s domestic innovation and production base has led to soaring prices and consumer angst

- As a result of the business retreat, Russia has lost companies representing ~40% of its GDP, reversing nearly all of three decades’ worth of foreign investment and buttressing unprecedented simultaneous capital and population flight in a mass exodus of Russia’s economic base

- Putin is resorting to patently unsustainable, dramatic fiscal and monetary intervention to smooth over these structural economic weaknesses, which has already sent his government budget into deficit for the first time in years and drained his foreign reserves even with high energy prices – and Kremlin finances are in much, much more dire straits than conventionally understood

- Russian domestic financial markets, as an indicator of both present conditions and future outlook, are the worst performing markets in the entire world this year despite strict capital controls, and have priced in sustained, persistent weakness within the economy with liquidity and credit contracting – in addition to Russia being substantively cut off from international financial markets, limiting its ability to tap into pools of capital needed for the revitalization of its crippled economy

Looking ahead, there is no path out of economic oblivion for Russia as long as the allied countries remain unified in maintaining and increasing sanctions pressure against Russia, and The Kyiv School of Economics and McFaul-Yermak Working Group have led the way in proposing additional sanctions measures.

 

*****

Fifteen months after the start of the war, the situation has reportedly eased slightly, but not substantially. There is a limit to Russia’s central bank interventions. In the long run, sanctions would be the most worrying thing for Russian citizens.

The sanctions removal will happen in the same way as the introduction of sanctions. Every few weeks, the US and Europe announce a package specifying in detail a new sanction list. In May 2023, the EU is planning to announce the eleventh package of sanctions.

The removal of sanctions should happen now wholesale but based on Russia reaching the agreed action points. For example, once Russia withdraws all troops from the Ukrainian territory and successfully demonstrates a ceasefire for two weeks, a single package of sanctions can be withdrawn. Once Russia frees Alexey Navalny, Vladimir Kara-Murza and other political prisoners, another package can be de-sanctioned. The sanction removal can take weeks or months, depending on how fast Russia progresses on delivering its promises.

*****

Ravi