While it’s probably no surprise that sanctions imposed by the U.S. and EU on Russia after its takeover of Crimea have done some damage to the Russian economy, what might surprise you is the far reach of those sanctions – on countries and businesses outside Russia and its primary industries.
Here’s a look at eight unexpected ways sanctions are making themselves felt on business in the rest of the world.
1. Many businesses in Germany could suffer “catastrophic losses.” Trade between Russia and Germany amounts to approximately 76 billion euros ($104.1 billion) annually.
According to Germany’s foreign trade group, the Federation of German Wholesale, Foreign Trade and Services, there are at least 6,200 businesses doing business with Russia, many substantially involved. Anton Boerner, the head of the trade group, said in a Dortmunder Ruhr Nachrichten interview, “About 6,200 German companies are engaged in Russia, some of them very strongly. For them, economic sanctions would be a real catastrophe.”
2. U.K.-based luxury stores and hotels are taking a hit. Russian tourists flush with cash love to spend in the U.K., but the Ukraine crisis has already caused a substantial drop in receipts at the hotels that cater to those tourists and at the boutiques they frequent when abroad.
According to Global Blue, which processes 80% of all tax-free shopping in the U.K., just in February – before sanctions even hit – the U.K.’s take from Russian spenders fell by 17% from February 2013 (in 2013 such Russian spending rose 16% for the year), thanks to the political situation that has made tourists reluctant to travel and the fall in the ruble. Sanctions that have resulted in Visa and MasterCard cutting off services to four Russian banks so far will undoubtedly further curtail tourist spending sprees, since it will be tougher for them to spend what they have.
3. The G8 is now the G7. With Russia kicked out of the G8, the planned meeting of world leaders that was to take place in Sochi this summer, with Russian President Vladimir Putin as host, has been moved to Brussels. That will take a toll on any immediate financial advantages Putin may have anticipated for Sochi after the conclusion of the Olympics, such as tourism or business investment.
More long term, however, is the potential for greater political turmoil and changing business arrangements as the G7 countries work around Russia and Russia builds closer ties with Asia – something it has already taken action on.
4. Some Canadian companies could stand to lose big if Russian plans to allow Putin to seize and nationalize foreign-owned assets in the country.