Besides the drop in the Euro against the dollar in recent months, it now appears that one of the other primary reasons for Europe’s slump into deflation and a triple dip recession is the economic sanctions being imposed upon Russia by the U.S., and subsequently, the retaliatory sanctions being put upon the EU by Russia. In a new report on Oct. 29, exports to Russia from Germany fell by more than 25%, and is the worst drop in trade between the two countries since the 2009 credit crisis and Great Recession.
Europe, and in particular Germany, rely heavily upon exports to Russia since the largest Eurozone economy has over 6000 companies that do significant trade with the Eurasian power. And with Russia turning more towards China and other non-Western economies to supplement lost products such as food and technology, economies in the EU are experiencing incredible pain from sanctions and the ongoing proxy war which inflicts them with collateral damage in this game of retaliation over conflicts in both Ukraine and Syria.
German exports to Russia fell by more than 26 percent on the year in August, the sharpest fall since the financial crisis in 2009, according to data released on Wednesday that underlined the impact of Russia sanctions on Europe’s biggest economy.
Exports to Russia in August were worth 2.3 billion euros ($2.93 billion), a 26.3 percent drop against the same month a year earlier, Germany’s Statistics Office said. For the January-August period, exports fell 16.6 percent to 20.3 billion euros.
Germany is Russia’s biggest trading partner in the European Union, but its exports to Russia already shrank 5.2 percent in 2013, after high growth rates from 2010-12.
Some 6,200 German firms are active in Russia, which helps explain why Berlin was initially reluctant to impose sanctions on Moscow for its annexation of the Ukrainian peninsula of Crimea in March. – Moscow Times
Unlike most nations, German politics are highly influenced by their corporations which have put vast pressure on Chancellor Angela Merkel to reject U.S. sanctions in favor of allowing trade to continue unimpeded with Russia. The result of this influence was seen earlier this year in the elections that saw Merkel’s support from the public and from big business fall significantly.
Unfortunately for Germany, and especially failing economies in the Eurozone like France, Greece, and Italy, continued sanctions will only increase civil unrest as several businesses have already laid off workers or cut back operations thanks to Russia’s decision to enforce retaliatory sanctions on EU nations simply because they have chosen to ally with the United States. And judging from Germany’s massive decline in exports to Russia, these measures are showing up to be significant to the Germany economy.
The current economic proxy war between the U.S. and Russia is a game of chicken that Europe cannot afford to have continue for any extended period of time. Russia has already found new markets outside the Eurozone in which to supplement lost imports, but the EU has been unable to do the same for exports that used to head East prior to the sanctions. And as winter quickly unfolds over the continent, further restrictions on Europe’s ability to export goods to Russia will only increase political and economic tensions between member EU states, and drive Europe’s economy downward to levels not seen since 2009 and the end of the Great Recession.