Abstract:
After the Russian takeover of the Ukraine- controlled Crimea on March 14, 2014, sanctions were immediately imposed by the Americans as an attempt to control Russia’s continuous attempts to destabilize Ukraine. However, many question as to what effects these Americans sanctions have on the economy, business sector and people. In order to answer this question, this study proposes to use observational and narrative research in order to discuss the overall nature of the issue and analyze the changes within the duration of the issue.
Abstract: 2
Introduction: 4
Literature Review 5
Methodology 8
Research Philosophy 8
Research Methods 9
Data Sampling 10
Data Collection 11
Bibliography 11
Introduction:
Since the country gained its independence from the former Soviet Union after the end of the Cold War in 1991, Ukraine has been on the receiving end of Russia’s continuous attempts to reclaim influence in the region. Russian politicians, according to Woehrel (2014), wanted to reclaim Ukraine due to its strategic position as the border country between Russia and NATO member countries Poland, Slovakia, Hungary and Romania. With Ukraine’s government aligning towards a Westernized model after the removal of President Viktor Yanukovych in February 21, 2014, Russia had immediately mobilized its military forces and annexed the Crimean Peninsula. The international community, especially the United States and the European Union, all reacted negatively against Russian action due to its impacts to Europe and the world. The US and the EU, in response to Russian movement, imposed sanctions against 64 Russian individuals and firms for their suspected involvement on destabilizing Ukraine .
The main question this study would try to answer is ‘What are the effects of the American sanctions on Russian businesses and the Russian people?’ The researchers selected this research topic due to the results of past sanctions imposed by the international community as a means to resolve sanctions. Some sanctions had been successful in resolving conflicts; however, a majority of imposed sanctions only triggered further conflict or served as a two-edged blade to those who have ordered it. It is the intention of this study to determine whether or not sanctions, such as those imposed in Russia, can still be considered an effective medium to resolve or influence conflicts. This study also aims to determine as to whether or not the American-imposed sanctions served its purpose or if it had only caused issues for the United States and other nations supporting these penalties.
Literature Review
With the sanctions placed on Russia after the country’s attempt to force Ukraine to their control, experts have been divided as to what crucial impacts the sanctions brought to both the economy, businesses and people of Russia. In terms of its economy and businesses, Moec, Bottcher and Schneider (2014) and Iskyan (2014) argued that the Western sanctions have already hampered the Russian economy as the sanctions covered not just President Vladimir Putin’s inner circle of politicians, allies and business elites, but also its economic sectors. While some of the affected companies and banks under the American sanctions, the article stressed that it still triggered the weakening of Russia’s ruble, increased inflation rates and lower GDP growth . Carney (2014) reported that Russia is also starting to lose capital due to the Western sanctions amounting to almost $30 billion. The IMF, according to the report, even stressed that Russia is on a state of recession and would continue to do unless the sanctions are lifted. .
Furthermore, Platt (2014) argued that mergers and acquisitions for Russian companies have also been difficult due to the sanctions imposed to Russia because of the Ukraine Crisis. The article indicated most of Russia’s deals already account to 17.2% of the global mergers and acquisitions for the year. However, with the sanctions affecting businesses indirectly, it may be difficult for companies such as Morgan Stanley to gain clearances from the Committee on Foreign Investment of the United States. President Obama’s March 21 order of targeting members operating for the Russian Federation economy would also hamper sectors such as financial services, energy, metals and mining in the process. Obama did admit, however, that it would also affect the global economy .
There are also experts that cited that the American sanctions on Russia only gave leeway to the Russian people to look to other ventures that would allow them to overturn the effects of the US-imposed sanctions. In the articles written by Salameh (2014) and Neville (2014), Russia is already working on turning its ventures to Asia given the high energy demand in the region and the declining demand both in America and Europe. Even if Russia loses its influence in the European and American markets on oil, the author stated that Russia already has contingency plans in India, China and South Korea to stabilize the economy with numerous oil-related ventures and projects. The Crimean Crisis, according to the article, would only accelerate Russia’s drive to sustain the Asian region and increase the prices for Europe and even the United States . It is also observed by analysts that Russia would allow Asian investors to gain access to a diverse market once Russia turns its attention to the region .
In another article written by Interfax (2014), Russian Prime Minister Dmitry Medvedev stated that Russia by turning to other markets such as China to stabilize its economic growth and international reserves. The article also expounded that Russia had reduced investments in the United States and Europe in response of the sanctions and invested in other markets and sectors . Aris (2014) also argued stated that Russia has immediately acted to stop the sanction’s impact by setting up the country’s national payment system to replace VISA and MasterCard. Both payment systems are now threatened by the Russian government to pay deposit fees as a guarantee to Russian customers. The article had also cited that Russia is also moving away from the use of dollar to sustain its economy, which may even derail America’s economic dominance .
When it comes to how the Russian people are affected by the sanctions, positions vary given the circumstances brought by the sanctions. In the article written by Interfax (2014), polls reveal that the Russian public expect the new issues involving the Crimean annexation to occur which may affect Russia. The polls also revealed that Russians knew that only a part of Russia would be affected by the sanctions and not the entirety of the country. However, there were also a few people who believed that the sanctions are for the entirety of the Russian people. A larger percentage also believed that the Western countries would not impose harsh sanctions given the possibility of Russian retaliation, a few even believe that it would be beneficial for the domestic and agriculture industries .
On the other hand, however, available literature also highlighted that the impacts of the American-imposed sanctions to Russia did not just affect Russia but also the nations that had imposed the sanctions, including the United States. Tiftik (2014) indicated that a possible spillover is possible once newer sanctions are added to the current sanctions imposed by the EU and the United States. Most of the impacts would be directed to Europe as the sanctions would reduce investor confidence in the region, especially Russian businesses from investing outside the country. Foreign direct investment has also dropped significantly in areas such as Cyprus and the Netherlands due to the number of Russian firms located in the countries. France, Italy, and Germany would also be affected because of the international bank claims Russia has of almost $219 billion by the end of 2013 .
Beacham (2014) also added that the European Central Bank has already raised concerns as to the ongoing issue in Ukraine and Russia. The ECB has already cut down its benchmark interest rates to its all-time low and currently considers the use of “broad portfolio of simple and transpartent” asset-backed securities and bond-purchase programs to sustain the possible impact of Russian decline. With the Eurozone still on red alert and with its major countries – such as Germany and France – recording negative growth rates in their respective economies, Europe’s recovery may become slower and weaker . Finally, Yanagisawa (2014) argued that putting sanctions against Russia would only affect those who impose the sanctions given the closure of opportunities for exporting countries to enter the Russian market, especially in the field of energy. While the Middle East can still sustain the energy demand of the rest of the world, the reduction of Russian exports would also influence world market prices of up to $30/bbl. In the case of the United States, the Russian sanctions would prevent the country from gaining access to cheaper alternatives to Middle Eastern oil which may increase the country’s dependence and influence overall oil prices for the rest of the world .
Methodology
Research Philosophy
The researchers, for this study, would be taking on an interpretivism stance to analyze the nature of the issue at hand. This research philosophy, according to Lewis-Beck, Bryman and Liao (2004) argue that interpretivism views that:
“the subject matter of the social sciences – people and their institutions – is fundamentally different from that of the natural sciences. The study of the social world therefore requires a different logic of research procedure.”
Utilizing this research philosophy will permit the researchers from analyzing all possible arguments and patterns as to how its main question can be answered . In the case of the main question for this study, it is likely that the impacts of the sanctions imposed on Russia would either weaken the Russian economy in its entirety or open new opportunities for Russia. Factors such as Russia’s energy market, political agreements and the sanctions it can impose to the West can influence how the American sanctions affect Russia. It is also likely that the impacts of the sanctions is not just going to affect Russia, but also America and the European Union. However, the researchers will have to consider not to include their personal biases to reign in this study as it would influence the course of the arguments for this study.
Research Methods
In order to answer the main question raised for this topic and additional questions that may arise throughout the study, this research will be using observational and narrative research to discuss the arguments in detail. This research method would provide the researchers a systematic analysis of the arguments and data collected to support all points that may be raised to counter the main arguments. Observational research would also allow easier identification of important factors and patterns that may change the results of the study. Observational research for this study would entail the use of case studies that would compare the situation of Russia towards other nations which have been imposed with the same type of sanctions by the United States. Countries such as North Korea, Iran and Cuba had also been imposed economic sanctions by the United States and it had significant effects not just for the target country but also to several countries known to be connected to these countries.
A narrative research or interpretative research, on the other hand, would support the observational research method to organize all facts and data in a chronological order. This research method would also permit easier discussion of facts, especially interviews from notable personalities involved in the issue. Several interviews this study aims to use are the ones that featured statements from Russian President Vladimir Putin and American President Barack Obama. These statements would reflect the country sentiments on the sanctions, and how these actors aim to reduce these impacts for the benefit of their countries. The interpretation of the study under this narrative research would sustain the constructivist philosophy, checking the credibility and confirmability of the data raised for the arguments.
Data Sampling
Considering the data that will be used for this study is of qualitative nature, data sampling for this study would be both done through theoretical sampling and content analysis sampling. Theoretical sampling would involve case comparisons to determine the effectiveness of sanctions in the past and the application in the Russian case at the present. Utilizing the case study or theoretical sampling would permit the researchers to understand the importance of the issue and determine as to why there is still a preference of utilizing sanctions despite its implications. Content analysis sampling, on the other hand, entails the analysis of written data to determine the positions and attitudes of the actors from both the American/European and Russian sides. This sampling technique would permit the researchers reduce the number of data that can be included in the study to the necessary data that should be taken into consideration. Content analysis would also permit the researchers to organize the arguments of the study. The quantitative data – in the form of graphs, tables and numerical values – that would also be available from the primary and secondary sources this study would use would also use the same sampling method in order to see the patterns on how sanctions affect each country.
Data Collection
In order to achieve the objectives and answer the main question raised for this study, data collection with the use of primary and secondary sources. The primary sources would come from the official documentations and communiques of the United States and Russian governments, as well as the European Union through their websites. Other primary sources can also come from the United Nations and financial institutions such as the World Bank and the International Monetary Fund. These primary sources would contain information regarding the nature of the sanctions imposed to Russia and the official analysis of each government regarding its impacts. The secondary sources, on the other hand, would come from books, journals, news reports and working papers. As the topic is quite recent and still on-going, these secondary sources would highlight the various arguments regarding the impacts of the sanctions to Russia, the EU and the United States. These secondary sources would also include data regarding the history and nature of the sanctions imposed.
Bibliography
Aris, B., 2014. Impact of Sanctions on Russia: An Assessment, London: European Leadership
Network.
Beacham, W., 2014. Europe still vulnerable. ICIS Chemical Business, 286(5), p. 7.
Carney, S., 2014. U.S. Official Says Russia Starting to Feel Impact of Sanctions; Official Says
Russia Losing Capital as a Result of West's Response, New York: Wall Street Journal.
Interfax, 2014. Two thirds Russians believe West not going to introduce harsh sanctions
regarding Russia - poll, Kiev: Interfax: Ukraine General Newswire.
Interfax, 2014. UKRAINE Crisis; Sanctions: Russia can turn to other markets to minimize
impact off further EU sanctions - Medvedev, Moscow: Interfax: Russia & CIS Business & Investment Weekly.
Iskyan, K., 2014. Escalating Sanctions Could Hit Growth. Global Finance, 28(5), p. 12.
Lewis-Beck, M., Bryman, A. & Liao, T., 2004. The SAGE Encyclopedia of Social Science
Research Methods. London: SAGE Publications.
Moec, G., Bottcher, B. & Schneider, S., 2014. The economics of sanctions: The West can afford
Neville, L., 2014. Can Russia Survive Without the West's Money?. Global Finance, 28(8), p. 15.
Platt, G., 2014. Sanctions Threaten Russian Deals. Global Finance, 28(5), pp. 95-96.
Salameh, M., 2014. Turning the Gaze towards Asia: Russia's Grand Strategy to Neutralize
Western Sanctions, Haslemere: USAEE/IAEE Working Paper Series.
Tiftik, E., 2014. Potential Market Impact of Russian Sanctions, Washington, D.C.: Institute of
International Finance .
Woehrel, S., 2014. Ukraine: Current Issues and U.S. Policy, Washington, D.C.: US Library of
Congress, Congressional Research Service.
Yanagisawa, A., 2014. Ukraine Crisis: Costs of Economic Sanctions against Russia for Japan,
Tokyo: Institute of Energy Economics - Japan.
