[ad_1]
(Bloomberg) — The impact of European Union sanctions on its own economy has so far been largely limited to a few specific sectors, according to an assessment prepared by the bloc’s executive arm.
Most read by Bloomberg
The restrictive measures have caused supply problems in sectors such as timber and precious metals, but the broader disruptions were largely due to global market trends, Russia’s war in Ukraine and Moscow’s own retaliatory steps, according to a person familiar with the analysis.
The impact assessment, requested by member states, comes as EU countries debate proposals for a ninth package of sanctions, which would target Russia’s access to drones and impose further restrictions on investment, banks and technology exports.
The bloc has tried to adjust its sanctions to punish Moscow more than its member states. Hungary, which has resisted some EU efforts to sanction certain targets, has blamed the bloc’s sanctions for its economic woes, but analysis suggests the criticisms are overstated.
By the end of November, the EU had approved more than 150 national measures to ease the shock of Russia’s invasion of Ukraine as part of a temporary crisis framework that allows flexibility under state aid rules, said the person, who requested anonymity because the document has not been made public. The measures amount to an estimated 525.5 billion euros ($554 billion).
EU targets access to Russian drones, banks in sanctions package
The EU has sought to clarify or even modify its sanctions to ensure they do not affect Russia’s food exports, or restrict its oil sales too severely.
Before Russia’s invasion, the EU economy was expected to expand significantly, mostly returning to pre-pandemic production levels. Instead, the war has led to higher prices and supply chain disruptions, and put pressure on public finances as governments try to cushion the impact of rising energy costs.
The rise in energy prices has been particularly severe in the EU compared to the US and Japan, challenging competitiveness and resulting in production cuts in several factories. Measures introduced by member states to limit the impact of high energy prices on households and companies are estimated to have a net budgetary cost of 0.9% of EU gross domestic product in 2022, the estimate states.
Following political pressure to phase out Europe’s dependence on Russia and ban its offshore oil, Moscow’s gas and oil imports have fallen significantly and are currently around one-third of the levels seen at the start of the year, the estimate said. . The transition period for the marine oil ban, along with exemptions for oil delivered by pipeline, has allowed market participants to provide sufficient alternatives for now, address infrastructure bottlenecks and upgrade refineries.
Continued disruptions in Russian gas supplies could, however, worsen the outlook for inflation and economic activity, the assessment said. The supply to several routes has already been interrupted.
What we learned three days after the Russian oil price cap
Although EU GDP increased in the first half of this year, the bloc’s annual inflation rate reached 11.5% in October, and growth was uneven across the bloc, with some countries recording low or negative rates. Consumer confidence is at a record low and a recession cannot be ruled out, the person said.
EU export restrictions are designed to minimize the impact on supply chains. Imports from Russia have fallen to around 9% of total inbound trade from 40%-45% before the war, with countries such as Turkey, Brazil, South Korea and India replacing key imports.
However, the timber ban has contributed to price increases and there are still problems with the supply of plywood and oak, according to the assessment.
Some products are in short supply because of the war and measures taken by Moscow, not as a result of sanctions. Imports of rare gases, such as neon and xenon, which are needed to make chips, have collapsed.
Strikes on critical raw materials — which are not sanctioned — have so far been largely avoided. Imports increased for aluminum, nickel and titanium, and slightly decreased for palladium and copper, the assessment showed.
The oil price cap is not a change for Putin’s war budget
One vulnerability exposed by the war in Ukraine is the EU’s reliance on Russian railways and freight corridors with China, the analysis said. This issue is likely to affect shipping costs and comes with challenges with air freight as well as shipping difficulties at mostly Chinese ports.
The prices of food and agricultural products, which before the war were rising for several items, started to fall, thanks in part to the Black Sea grain initiative and the establishment of the so-called solidarity paths, according to the assessment.
— With the help of Eva Krukovska.
The most read from Bloomberg Businessweek
©2022 Bloomberg LP
[ad_2]
Source link
