Sanctions on Russia Bite Europe, China the Beneficiary

European sanctions on Russia have hurt the EU far more than Russia. Moreover, Europe has lost key machinery contracts to China, and those contracts will likely stay with China even after sanctions are lifted.

Please consider Europe Feels Sting in the Tail of Russia Sanctions.

At a technology fair in Moscow last month, European executives faced the new reality of doing business in Russia since the West imposed sanctions: the number of companies at the international showcase had shrunk by half from a year ago.

"The impact on business couldn't be clearer. Fewer stands, fewer companies," said Mark Bultinck, a sales executive for Belgian digital screen maker Barco, which had a booth at the annual expo for the audiovisual industry.

The impact of the sanctions was already clear to Barco.

The company lost Russia's biggest shipbuilder as a client when the United States and the European Union blacklisted United Shipbuilding Corporation in July, meaning Barco could no longer sell screens to the company for its vessel training simulators.

Barco's experience shows how sanctions are having a broad impact not just on Russian companies but on European ones too and at a time when Europe's weak economy can ill afford it.

companies are at risk of losing contracts to competitors from China and elsewhere, according to Frank Schauff, chief executive office at the Association of European Businesses in Russia.

"Countries that have not imposed sanctions are able to jump in where the EU has left a gap," said Schauff. "The economic position that the European Union has in Russia is at risk and it is very difficult to gain that back if it is lost."

Lost Business

• EU exports to Russia fell 19 percent to 7.9 billion euros ($9.91 billion) compared to July.
• EU exports down 18 percent compared to August 2013.
• Total EU exports fell 12 percent in the first eight months of this year compared to a year ago.
• EU exports of machinery and transport equipment such as cars and tractors fell 23 percent compared to July.
• Machinery and transport exports fell 21 percent from a year ago.
• Manufactured exports fell 16 percent across the 28-nation bloc in August.
• Italy's manufactured exports tumbled by almost half.

None of this should be surprising. It's exactly what one could have and should have expected at the outset. The only beneficiary of the inane sanctions has been China.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com