The sanctions, the last batch of which took effect on Friday, are targeting with ever increasing intensity the Russian economy and a growing number of key individuals. The defense, financial, and energy sectors have been hit the hardest. Oil and gas exports are Russia’s economic and fiscal lifeblood; Western financing is Russia’s corporate lifeblood. And that’s where the sanctions have begun to bite viciously. But not only in Russia….
They’re gnawing at the revenues and profits of German companies, and potentially at the value of stock-based compensation and bonuses of their chieftains, who have been waging a loud and relentless campaign against the sanctions, which so far has fallen on deaf ears in Berlin.
A major shift in mercantilist Germany. The prior Chancellor, Gerhard Schrder, a West German through and through, has become Putin’s best buddy over the years, and within practically moments after getting kicked out of office in 2005, started to work for him. Which has led to some delicious imbroglios [for example… Putin Parties With German Ex-Chancellor, Sanctions Be Damned].
Chancellor Angela Merkel originated in Soviet-dominated East Germany, had to learn Russian in school, and experienced Soviet power first-hand. There’s no love lost between her and Putin. Even before the Ukrainian fiasco mucked up the ‘strategic relationship,’ as every German government has insisted on calling it, meetings between them were, let’s say, awkward – though big commercial deals were always signed, and that’s what counted in mercantilist Germany. But not anymore.
Over the weekend, it was Eckhard Cordes, chairman of the Committee on Eastern European Economic Relations, who attacked the new sanctions, warning that they would not contribute to a de-escalation of the crisis. He added the word ‘dangerous’ to the already common ‘sanction spiral.’
This post was published at Wolf Street by Wolf Richter ‘ September 15, 2014.