The Boomerang Effect: Sanctions on Russia Hit German Economy Hard

[unhappycamper]

http://www.spiegel.de/international/business/german-economy-hit-by-us-eu-sanctions-on-russia-a-982075.html



Companies like oil producer Rosneft -- here, a Rosneft drill site in eastern Siberia -- have been slapped with US sanctions. That has created problems for German companies.

The Boomerang Effect: Sanctions on Russia Hit German Economy Hard
By Matthias Schepp and Cornelia Schmergal
July 21, 2014 – 05:11 PM

It wasn't that long ago that Kremlin officials could hardly avoid laughing when asked about the economic sanctions imposed on Russia by the West. As long as every NATO member state jealously sought to protect its own business interests, things "weren't all that bad," they gloated.

But since last week, their moods have darkened. For months, the European Union in particular had been reluctant to enact effective penalties against Moscow. Last Wednesday, though, the 28 EU heads of state and government cleared a psychological hurdle: For the first time, they opted go beyond sanctions targeting individual political leaders in Moscow, adding prohibitions against doing business with specific Russian companies that contribute to the destabilization of the situation in Ukraine. A concrete list is to be presented by the end of the month. European development banks have also been banned from providing loans to Russian companies.

The US, for its part, penalized a dozen leading Russian conglomerates, including oil giant Rosneft, natural gas producer Novatek, Gazprombank and the weapons manufacturer Kalashnikov. From now on, they are forbidden from borrowing money from American monetary institutions and from issuing medium- and long-term debt to investors with ties to the US.

For the companies involved, the penalties are a significant blow. It has become difficult to acquire capital in Russia itself, with both domestic and foreign investors withdrawing their money from the country in recent months. It is hardly surprising, then, that Russian Prime Minister Dmitry Medvedev spoke of a return to the Cold War and President Vladimir Putin warned that sanctions "usually have a boomerang effect."

[Historic NY]

1. Perhaps Merkle might want to pressure Putin, then...

or their companies might want to reconsider investments.