2017/02/20

Here's Why Trump Decided to Breathe New Life into Russia

What would happen if the United States lifted economic sanctions against Russia?

Since the Russia annexed Crimea, the United States led the western countries have imposed economic sanction on Russia for three years.

Now president Trump has hinted that he will lift economic sanctions against Russia in return for cooperation with Russia in other international affairs.

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Economic sanctions against Russia and the Russian government is a chain for their economy, and now Trump wants to get rid of this chain, absolutely he will face strong opposition from the Congress of the United States and the United States allies.

What does it mean for Russia if Trump really lifts economic sanctions against Russia?

William Jackson, senior emerging markets economist at Capital Economics, said that removing the sanctions would provide a meaningful boost to Russia's struggling economy.
"They are still very damaging to the business environment," he said of the sanctions. "There's no question about the pressure on the economy."

Europe and the United States are trying to stop the Russian economy going into the western financial system, but also prevent Russia to buy oil from the western exploration technology and equipment, and related services etc..

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Russia's economy suffered economic sanctions, and also suffered a sharp fall in international oil prices, these two factors make Russia's economy eroded. The economy shrank by 3.7% in 2015 and 0.7% in 2016. Inflation skyrocketed and the value of the ruble collapsed.

The Russian government had to adjust economic policy, and gradually the Russian economy began to recover. The International Monetary Fund said in November that after absorbing some of the shocks from low oil prices and sanctions, Russia's economy is likely to return to growth this year.

Benefit ordinary people in Russia


"Firms would be able to increase investment and hiring, which would result in higher employment and disposable incomes," Jackson said.

In response to western economic sanctions, Russia banned imports of fresh food from western countries. This has led to a shortage of food and rising prices in Russia.

After the lifting of economic sanctions, the Russian people will benefit from the country, the lives of ordinary Russian people will be much easier.

Oil and gas

Economic sanctions forced Russia's energy companies to stop some of their projects. Russian oil companies and Russian gas companies can export oil and gas to repay the debt they have borrowed, but also access to funds to support new development projects.
Now they are banned buying equipment and technology from the west. A lifting of sanctions could help boost exploration and efficiency.

 Cash available

The removal of U.S. sanctions would help Russian companies access desperately needed cash.
The sanctions are designed to cut off Russian firms from Western funds -- restrictions that have led to a downturn in investment and new projects.
In addition, Russia's banks can also benefit from the abolition of economic sanctions. At least 5 Russian banks have been blocked from raising cash in the West.

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Europe's response to Russia's economic sanctions


Even if Trump decides to lift economic sanctions against Russia, EU countries will not be able to catch up soon.

But Jackson said that even if the U.S. decides to lift sanctions unilaterally, it would be enough to significantly boost Russia's economy.


"My sense is that the U.S. sanctions might be more important, because of the importance of the dollar as the global reserve currency," he said.

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