Why Russian are not afraid of sanctions to the Ukrainian economy

On Thursday morning, the government of the Russian Federation for the first time since the aggression against Ukraine in 2014 have imposed economic sanctions against Ukrainian individuals and legal entities In the sanctions list includes 322 individuals, including politicians (e.g., the speaker, leaders and members of factions of the Parliament), government officials, and also businessmen, such as Konstantin Zhevago Konstantin Grigorishin, Galina and Alexander Gerega, Andriy Verevskiy, Gennady Bogolyubov, Sergey and Alexander Buriak, Leonid Chernovetsky, Alexander Yaroslavsky.

Почему российские санкции не страшны украинской экономике

Contributed to the sanctions list and 68 companies, both Ukrainian and foreign holding companies, which owns the Ukrainian assets, for example, EastOne, Ferrexpo. In this list only two financial institutions – Bank Credit Dnepr, owned by Viktor Pinchuk, and the insurance company “INGO Ukraine” Alexander Yaroslavsky. The other company industry: AutoKrAZ “Cherkasy Azot”, PJSC “DneprAzot”, “Rovnoazot”, *, Irshansk mining and processing plant, Eastern, ore, Mezhdurechensky and Pokrovskiy mining companies, “Zaporozhkoks”, state food, concern “Galnaftogaz”, “Complex Agromars”, “United mining and chemical company”, “MHP”, “NIBULON”, “Ukrspirt”, “kernel”, etc.

From the sanctions list two primary preparer: the decree was signed by Prime Minister Dmitry Medvedev for the implementation of the decree of President Vladimir Putin. A list of approved “in response to unfriendly and contrary to international law the actions of Ukraine-related restrictive measures against citizens and legal entities of Russia.” “The approach to the development of the sanctions I’d described in one word – revenge. It includes all Ukrainian public persons in power and their businesses or the businesses of their immediate environment. There are no economic interests, except for a few positions, there is not observed”, – the member of Ukrainian society of financial analyst Vitaly Shapran.

Special economic restrictive measures include the blocking and freezing of non-cash, book-entry securities and property “sanctioned persons” on the territory of Russia, as well as the prohibition on withdrawal of capital abroad.
Bank Credit Dnepr said that the sanctions will not affect their work. “Our state is already not the first year is in conflict with the Russian Federation, so most of our customers have already found other markets and customers alternative markets. In this regard, the volume of transactions in Russia almost came to naught. No property on the territory of Russia, the Bank Credit Dnepr never was, therefore, no adverse effect on the business, this decision will not have”, – reported in a press-service.

IC “INGO Ukraine” has refused to comment on the issue of sanctions, because the issue is properly addressed to the owner, against which imposed personal sanctions. But at the request of the journalists in the DCH group did not answer. Vitaly Shapran recalls that before the IC “INGO Ukraine” has a lot of risks reinsured in Russia. “They used was a “daughter” of Russian insurer (Ingosstrakh. – Ed.) which quickly left our market,” – said the expert.

Exports of goods from Ukraine to Russia
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A small loss
Sanctions can have an impact on the work of Kernel Holding. “He has a stake in a grain terminal in the port of Taman. The company uses the port for transshipment of grain, but in 2018 gave his quota handling 1.8 million tonnes of grain to a third party. From this transaction, “kernel” received $7.8 million and represented them as other operating income. Although this income is not shown by the company in EBITDA in 2018, but it’s roughly 3.5% of EBITDA for the period. For 2019, the company signed a similar agreement on the transfer of quota overload of grain, but 2 million tons, because we can expect that the “kernel” could lose $8 million because of the imposition of sanctions,” – says the analyst of Concorde Capital Andrew Peredery.

The impact of sanctions on the business of other companies may be even less. “The question of influence on Ukraine’s economy remains open, although the imposition of sanctions should not particularly be displayed the economic situation. Because of the negative consequences should not be. Most companies list assets in the Russian Federation because such sanctions would have no affect”, – says Andrey Perederiy.

Many Ukrainian companies, which have business in Russia, the list was not there. We are talking about a wide range of businesses: from manufacturers of strong alcohol to owners of coal mines.

Director of Institute for economic research and policy consulting Veronika Movchan noted that the list of Russian assets of Ukrainian companies is not, therefore, to measure the potential loss is impossible. During the military conflict of Ukraine with Russia, Ukrainian enterprises, which cooperated closely with Russia, refocused the business on other markets. “Previously, Russia has imposed economic sanctions, so companies have learned to work in new conditions”, – says the expert. For example, Russia in early 2016 has suspended the Treaty on free trade zone with Ukraine, and later banned the transit of goods from the territory of Ukraine in Kazakhstan and Kyrgyzstan. “This decision closed a direct ground path for Ukrainian companies in these countries”, – said Veronika Movchan.

Vitaly Shapran evaluates the negative impact of the Russian sanctions on the economy of Ukraine not more than 0.1% of GDP (about 3 billion UAH. – Ed.). “Rather, it is the next step in the complication of relations between the two countries with obvious political tint,” he concluded.

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