"Sanctions or not, the lives of our 'elite class' have not worsened; the closer to the center of power, the more comfortable life becomes."

The EU has once again threatened Russia, but this is not the most frightening aspect; Russia should first address its own economic issues.

Author: German Galkin

The European Commission recently proposed the 18th round of sanctions against Russia, which is also one of the largest-scale sanctions. Since EU sanctions require unanimous approval from member states, Hungary and Slovakia may oppose it.

The Western sanctions plan includes: reducing the price cap on Russian oil from $60 per barrel to $45; planning to ban all transactions and maintenance related to the "Nord Stream" pipeline; in addition, the EU intends to include 22 Russian banks on the sanction list. If the resolution passes, these banks will be cut off from the international settlement system and have their financial operations restricted.

Another key focus of the sanctions is targeting the "shadow fleet." The EU plans to include 77 oil tankers on a "blacklist," claiming that these ships assist Russia in evading sanctions and exporting oil.

Ultimately, the EU also plans to ban the purchase of petroleum products processed from Russian crude oil, meaning completely refusing to use oil products refined from Russian crude oil, even if these products are produced in other countries.

Now let us analyze who will ultimately suffer the most from various Western sanctions. It is well known that the EU's goal is to make Russia pay a heavy price.

Most sanctions stem from the special military operation in Ukraine, and the pressure of sanctions began as early as after Crimea joined Russia in 2014.

There is no doubt that Western sanctions have brought difficulties to Russia, especially in the financial sector. The sanctions implemented in 2022 led to the freezing of $30 billion of Russia's foreign exchange reserves previously stored in Europe and America.

Russian companies have also been deeply affected by the sanctions. A survey by the Russian Union of Industrialists and Entrepreneurs shows that two-thirds of respondents believe that the rise in prices for equipment and components is the most serious issue, and nearly half of the enterprises report a reduction in credit and investment channels.

To avoid sanctions, Russian companies actively develop "parallel imports," which, although increasing logistics complexity and additional costs, ultimately shifts the burden onto consumers.

However, every cloud has a silver lining. Russia has been forced to seriously promote import substitution policies that were previously only discussed in theory.

After Russia imposed countermeasures on EU agricultural products, the agricultural sector quickly developed, with Russian agricultural groups and farmers rapidly filling the market gap.

The departure of European companies also promoted the development of the food industry: Russian confectionery, which was already strong, now enters the shelves of large supermarket chains previously monopolized by foreign capital; cheese workshops have emerged across the country, and the quality of cheeses produced in Bashkiria, Adygea, and Altai regions is quite good.

When we stopped exporting raw timber solely to Finland, the domestic wood processing industry began to rise; after Boeing and Airbus withdrew, the aviation manufacturing industry迎来了 a turning point, and the prospects for MC-21 and upgraded "Superjet" aircraft are no longer out of reach; progress has also been made in engine manufacturing and the IT sector, although the process is difficult, change is happening.

Russia has repeatedly warned the West that sanctions are a double-edged sword. Three years ago, the EU, UK, and US dismissed this, but now they are no longer laughing —— the European economy is gradually slipping into recession.

Germany, once called the "engine of the EU," our former largest economic partner, is no longer as glorious as it was in the "zero decade" and "one-zero decade": major automobile giants have successively closed factories (which were Germany's pride), the petrochemical industry has contracted, construction has declined, and Germany's exports have plummeted —— exports once brought billions of income and supported stable corporate growth.

After proactively giving up cheap Russian energy (especially natural gas), Germany has had to spend more money importing liquefied natural gas from the United States or Qatar, which directly increases production costs. Whether in the international market or domestically, German companies' products have lost competitiveness, and many German companies have ultimately chosen to relocate to the United States.

The same logic also applies to the EU's decision to increase tariffs on nitrogen fertilizers and compound fertilizers imported from Russia starting July 1: the EU cannot escape dependence on Russian fertilizers, yet plans to raise tariffs from €45 per ton to €430 per ton within a few years, an increase of nearly tenfold.

Now European fertilizer plants are shutting down due to high natural gas prices —— producing fertilizers requires a lot of natural gas. It is not hard to foresee that the tariff increase will lead to rising prices for grain, vegetables, and potatoes in EU countries.

Take Poland as an example: local consumers have already purchased a large amount of Russian cucumbers —— their quality is no worse than Polish local products, but much cheaper. Now Russian cucumbers will also become expensive, but as said by Polish MEP Michal Baranowski: "We can further reduce Russia's export revenue."

This is like the fable: the mice cry bitterly but still persistently gnaw at the cactus...

Russian citizens have different views on the current situation. Some believe that Russia can get rid of many Western brands (such as clothing and footwear), but many consumers deeply regret the exit of IKEA from the Russian market. Yekaterina Kalpova, a resident of Chelyabinsk, told Free Media: "The services provided by this Swedish company are irreplaceable by Russian suppliers."

In terms of cost-effectiveness, IKEA products may not be the best, but in many categories, they are completely acceptable, and their ease of furniture assembly has long been an important advantage. But after IKEA left, there has been no comparable replacement in the Russian market.

Why can't they find one? Because large Russian companies (and small and medium-sized enterprises alike) are unwilling to invest in projects with returns below 200%-300%, and they demand quick profits. European companies accustomed to fierce competition expect profits about 1.5 times lower —— IKEA is known for affordable goods and makes money through turnover, while our companies are used to making profits by doubling or tripling markups.

Other sectors are similar. Take construction as an example: under the official average salary of 90,000 rubles (the median is closer to reality, around 70,000 rubles) and high mortgage interest rates, ordinary people cannot save enough to buy a house.

Meanwhile, millions of square meters of residential space remain vacant, and the "construction bubble" is on the verge of bursting, but developers still refuse to lower prices, waiting for the government to throw a lifeline. When someone suggests they curb their greed, they present various data, claiming there is "no other way."

In principle, the government should intervene —— create conditions for responsible businesses and warn greedy ones. However, at both federal and local levels, government departments often intertwine with businesses through "informal channels," and any enterprise attempting to enter "someone else's territory" will hit a wall —— after all, each side wants to protect its own "cake."

Russian citizens have noticed that one of the important consequences of Western sanctions is the withdrawal of foreign car brands from the market: European, Korean, and Japanese manufacturers stop production in their Russian factories to avoid being affected by sanctions.

Mainstream models from Germany, Japan, and Sweden have disappeared from the market, replaced by cars from related countries, but prices are two-thirds higher than those in their home countries —— despite the fact that the average wages of workers in those countries are higher than in Russia.

What is Russia doing? They saved the globally renowned Volga Automobile Plant and invested hundreds of billions in mass-producing electric vehicles completely unsuitable for Russian road conditions. Meanwhile, warehouses are filled with cars —— whether国产 cars from the Volga region or imported cars from related countries, they rust in the open air. Major carmakers and dealers still refuse to lower prices: the "Granta" sedan should sell for 500,000 to 600,000 rubles based on its actual quality, but they are asking for over 1 million rubles...

Back to the original topic: sanctions indeed cause us trouble, and it can be foreseen that EU bureaucrats will not alleviate the pressure of sanctions —— even if it harms the interests of their own member states. For today's European politicians, Russia is like a red cloth in front of a bull; they will blindly charge until their horns break. But that is their problem; we need to solve our own predicaments.

A friend of mine, a businessman, said when discussing this topic: "Ultimately, leaders at the federal and regional levels of Russia do not care about sanctions; their lives have not changed for the worse. The closer to the center of power in a business, the more comfortable life becomes." This view is hard to refute, especially when looking at recent sensational corruption scandals —— millions of rubles in bribes are no longer surprising, and the status of those implicated is equally astonishing.

The first thing to address is exactly this issue...

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Original source: https://www.toutiao.com/article/7516728858533216831/

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