The US imposes further sanctions on Russia

The Obama administration tightened economic pressure on Russia over its intervention in Ukraine by imposing further sanctions on some Russian individuals and companies. Most of the targeted groups were associates or bank subsidiaries of people and companies already sanctioned before by the Treasury Department’s Office of Foreign Assets Control. The group includes 34 people or companies and 14 individuals and entities of them are accused of helping previously targeted people evade sanctions. Six of those are Ukrainian separatists and are accused of activities in violation of Ukraine’s sovereignty and territorial integrity. Two served in the government of Viktor Yanukovych and one of them ordered the use of firearms against demonstrators in early 2014, while another is accused of embezzlement.

The U.S. requires Moscow to honor the Minsk peace agreement reached earlier this year in Belarus and to allow Ukraine to control its side of the border with Russia. The February, 2015 agreement compelled Russia to withdraw forces and materiel from eastern Ukraine’s front lines, release prisoners and provide unfettered access to international monitors. This measure is the first by the U.S. since July 30 and follows the European Union’s decision to renew its sanctions for six more months. The EU sanctions target certain exchanges with Russia in financial, energy and defense sectors and in the area of dual-use goods. Russia has already responded saying it will review the decision and will consider counter measures. The Russian Foreign Ministry said that Washington’s attempt to manipulate Russia is illogical and ineffective.

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News Briefs:

  • Representatives from Belarus, Russia and Kazakhstan discussed transit of Ukrainian merchandise and products from the European Union for later instructions for their presidents. The sides came up with the provisional plan on controlling the transit. Under the provisional scheme, the cargoes will be convoyed and as it was stated it will be impossible to somehow consume Ukrainian goods in the Russian Federation under the guise of transit. The scheme will come into effect by the end of the year as the Ukraine-EU free trade zone agreement will also be enacted. Two issues are underlined: substitution of Ukrainian products with imports from the EU and as a result Ukrainian products flooding CIS territory and selling EU products across the CIS after they are imported into Ukraine with zero customs duties.
  • The oil company ConocoPhillips (COP) decided to pull out of Russia after 23 years of operation. It announced on selling 50% state in a joint venture, Polar Lights, that produced 4 million barrels a day in northwestern Russia. Conoco launched its project in Russia in 1992, in the boom of many Western oil firms rushing into Russia after the fall of Communism. In 2005, Conoco made a strategic alliance with Lukoil and raised its ownership of the Russian oil company to 20%. In 2012, it completely divested its share in Lukoil. The collapse of the ruble along with Western sanctions on Russia over Ukraine made energy deals less profitable and investments financially risky. This was supplemented with dramatic fall in oil prices that made many oil giants cut back on investments. Conoco is one of those.
  • The Ministry of Economy of Kyrgyzstan proposed a draft plan on return of gambling business. The return is aimed at stimulating economic development, attracting foreign direct investments and ensuring sustainable economic growth. It also proposed to open a specialized international trade and exhibition center, which will include entertainment and gambling complex. The facilities are intended to be located close to the airport, some 26 kilometers from Bishkek. The law on prohibition of gambling activities came into effect in 2012 and the state banned activities of betting and bookmakers in 2015. But as the ministry stated, the prohibition led to moving gambling activities into shadows rather than eradicating them. About $200 million is expected from investments in the area.
  • The Russian Minister of Economic Development released its estimated loss over Ukraine-European Union deal. As the First Deputy Minister Alexey Likhachev said Russia’s loss will amount to $3.5 billion in short term due to suspension of Russian Federation treaty on free trade with Ukraine. Ukraine, the European Union and Russia held meetings in Brussels to reach an agreement on non-use of trade restrictions by the Russian Federation as DCFTA would come into effect but the discussions ended without any results. President Vladimir Putin signed a decree suspending the agreement on the free trade area with Ukraine from January 1, 2016 which was effective within the framework of the Commonwealth of Independent States.
  • The Belarusian government released a new economic growth estimate which indicates that the country’s economy will grow at .3 percent in 2016, plan of economic growth at 0.3% for 2016 depending on oil prices. The economic forecast was not met in 2014 and 2015 due to slumping oil prices and the same is expected in 2016 if oil prices remain at USD 40 per barrel and the Belarusian ruble exchange rate requires adjustments. The estimated economic growth of .3% in 2016 forecasts oil prices of USD 50 per barrel. The dependence stems from Belarus linkage with the Russian economy for over 40% exports to Russia and more than 95% for some foodstuffs. The Russian economy on the other hand largely depends on oil prices. The devaluation of Russian ruble and stagnation of Russian economy will further reduce demand for investment and consumer goods from Belarus.
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