Russian Administration Has a List of Additional Sanctions Ready for the US and the EU

Two federal employees have told Vedomosti that sanctions against the U.S. and the EU may not be limited to a ban on the import on food, and that Russia could introduce limits on the import of industrial goods as well. The sources say that the legislative branch has already sent subsequent proposals to President Vladimir Putin.

According to one of the diplomats, a few days after the EU and the U.S. introduced sectoral sanctions against Russia, the legislative branch sent the president a report with a long list of possible retaliatory sanctions. However, Putin ordered the sanctions to be limited to foodstuffs. “That means that additional sanctions from Russia are possible only if the EU and the U.S. tighten up their sanctions against us,” says the diplomat. A second diplomat says that the government doesn’t have the president’s order to introduce new sanctions yet.

The president’s press secretary, Dmitry Peskov, notes that Russian sanctions were a necessary measure. Consequently, new activity from the EU or the U.S. will force Russia to re-examine the possibility of expanding the retaliatory sanctions. The nature of those sanctions will depend on the West’s decisions, he says.

Last Thursday, Prime Minister Dmitry Medvedev warned that Russia could announce more sanctions. One example is a possible ban on European and American airlines transiting through Russia on their way to the Asia-Pacific region. Also, the government could take defensive measures in the spheres of aircraft construction, shipbuilding and the automobile industry, as well as others. According to the prime minister, that would be a logical decision in order to protect themselves. “For now all of this is just a horror story, no additional sanctions are being prepared at the moment,” assures the government officer. The government representative found it difficult to comment on the situation.

One of the federal diplomats says a possible option for sanctions is a complete (or almost complete) ban on the import of cars from “unfriendly” countries. According to him, internal production could meet demands, especially with current industrial assembly technologies.

According to data from ACM Holding, in the first part of 2014, light-duty vehicles made up 27 percent of shares imported to the Russian market, while trucks were 46 percent and buses were 13 percent.

A ban on the import of vehicles from Europe, the U.S. and several other countries will lead to a restructuring of the market, and will represent a win for those who have factories in Russia, including domestic brands (and this would put all the big global automakers in their place), says Executive Director of Avtostat Sergei Udalov. It is important not to ban parts, as all auto factories would take a hit from it.

An employee of one of the automakers, who is familiar with the discussion of “defense measures” on the auto industry, says that no decision has been made. He doesn’t know of any plans for import bans on vehicles from countries that introduced sanctions against Russia. That kind of ban would hit the Russian auto companies [hard]. He is sure that imports from Europe will be exchanged for parts from Korea and China; but with those vehicles, internal factories will not be able to fully compete because the parts will make the price of the cars more expensive. Vedomosti’s interviewee considers it to be far more effective to restrict imports by changing the criteria for used cars, for example. “In Russia, cars are considered used when they are older than three years — it is only one year for cars abroad (or if the car changed owners), and we need to adopt the same formula.” According to his evaluation, under changes in methodology, a minimum of 10 percent of the imported commercial cars that are now considered new would be considered used.

Restrictions on the import of medical devices are possible, but the question is touchy and requires additional discussion, says a federal diplomat. Wipes, bandages, surgical and primary diagnostic tools are among the medical goods that are produced in Russia, but they only make up 20 percent of the market, notes SCA Representative Evgeny Makhortov (whose company also makes medication and medical goods): “The rest — including high technology — is imported. If sanctions are imposed on it, then in our country we just won’t be able to get sick.”

The sector that Russia imports least is food production, and the past few years have seen import substitution in that branch. However, in the other branches of trade, imports represent a significant share and the room for maneuvering in Russia is small, notes Vladimir Sal’nikov from TsMAKP.