The Economic Consequences of Strengthened Sanctions against Russia

09/23/2014

On the 23rd of September 2014, the Representative of German Industry and Trade (RGIT) together with the German embassy in Washington D.C. hosted a workshop covering the extent of the recently tightened economic sanctions against Russia and the possible consequences for companies.

Ambassador Daniel Fried, responsible for sanctions policy at the U.S. Department of State, highlighted the importance of stricter sanctions against Russia in reaction to Putin’s Ukraine policy. He additionally hinted that if Putin remains reluctant to negotiate, costs for the country would continue to rise.

According to Senior Sanctions Policy Advisor Brian O’Toole of the Treasury Department’s Office of Foreign Assets Control (OFAC), the new sanctions, which entered in force on the 12th of September, are focused on Russia’s finance, defense and energy sectors.

For some companies, sanctions have expanded to their access to capital markets; the maturity period of new debt financing available to Russian businesses has been reduced from 90 to 30 days. This influences mainly the large Russian oil companies such as Rosneft, Transneft and Gazprom Neft. Deputy Assistant Secretary Peter Harrell of the State Department explained that sanctions target three different groups: individuals and separatist leaders in east Ukraine, Russian politicians and officials, and some Russian Oligarchs known to be longtime supporters of President Putin and his policies.