Who benefits from the sanctions

When Angela Merkel a few days ago came to Vladimir Putin in Sochi, the atmosphere was tense. No direct eye contact, critical statements from both sides, the rapid start of the conversation. Between the Chancellor and the Russian President, certainly, was attended by obstacles of Western sanctions. The Chancellor said again that the trade restrictions of the EU can be withdrawn only when you are the Minsk agreements on the peaceful settlement of the crisis in Ukraine. In a similar vein, earlier expressed and EU high representative for foreign Affairs Federica Mogherini during her first official visit to Moscow.

The Russian side in this regard and does not make any illusions. “We do not believe the lifting of sanctions”, — said the Russian Minister of Finance Anton Siluanov in an interview with Handelsblatt. And it hurts, despite all official assurances from the Kremlin. Although trade between Germany and Russia, according to the chamber of Commerce in Moscow, in January and February rose 43% to 6.7 billion euros, compared with last year, while exports from Germany, according to the Russian customs authorities, increased over the same period by more than 26 percent.

But this is due, primarily, with the gradual economic recovery in Russia and to strengthen the ruble. Predecessor Siluanov, Alexei Kudrin, a few days ago talked about the “very painful” the impact of sanctions on the Russian economy, which could lose its position in the global market. First of all, the problem is a limited access to Western capital market and now, as the economy that was a long time in the crisis, may now hope for a gradual recovery.

But this is only one side of the coin. Because while economists and politicians, at least, behind closed doors, United in the opinion that Western sanctions affect Russian companies, there are still industries that benefit from them, as well as heads of corporations and the oligarchs who earn well at this. For example, agriculture. Since the Russian government in response to Western sanctions imposed a ban on imports of Western food imports in the agricultural sector completely stopped. Consumers were forced to switch to domestic goods, the Minister of industry and trade Denis Mansurov in interview with Welt am Sonntag described the sanctions as indirect support for domestic production.

For 2015 and 2016 recession of the Russian agricultural production grew by 2.6 to 4.8%. In the pig and poultry Russia has moved to self-sufficiency in grain production has become one of the largest exporters in the world. “Grain is not less profitable than oil,” – said the Minister of agriculture, Aleksandr Tkachev, who is himself one of the largest investors in the agricultural sector. No wonder he considers it appropriate to maintain the sanctions and embargoes on imports for ten years.

Tkachev is not the only one who benefits from the sanctions. For the development of Russian equivalents of Western products, software, GPS or civilian aircraft — is a billionth of support, says Andrei Movchan, former investment banker and now head of the economic Department of the Moscow Carnegie Center. “Gennady Timchenko, an old friend of Putin, monopolized the trade of salmon, increased prices more than 200% and turned its chronically unprofitable company in an extremely attractive business.”

Businessmen from Putin’s immediate circle for their loyalty generously encouraged. Because of his Ukrainian policy, they were in the sanctions lists, he had to go meet them. With the new law, the head of the Kremlin provided them with privileges, namely that they — regardless of their actual time of stay in Russia — are tax-exempt in the country, if they were considered tax residents of another state. This law is in force since 1 January 2014. These privileges can not be underestimated, says Russian billionaire, who asked not to give his name to the newspaper Die Welt. But he believes their long-term time bomb for Putin, because the preference of one angry other companies.

While this anger will grow, and Putin’s inner circle will receive dividends. In addition to Tishchenko, it is, for example, a former sparring-Putin’s judo partner Arkady Rotenberg. Rothenberg for many years receiving the largest government contracts in the construction sector, it has received an order for construction of a bridge across the Kerch Strait. Good for him that domestic companies since the beginning of economic sanctions shielded from foreign competition. Even if it is impossible to calculate how high in fact the profit, the fact is that economic differences with the West, many Russian companies on hand. Timchenko, for example, moved up the list of the richest Russians on the fourth place with a fortune of about $ 16 billion. Arkady Rotenberg has improved its position on 36 points and climbed to 39th place with 2.6 billion dollars.

It is noticeable that ten businessmen from experiencing an incredible growth of the agricultural sector included in this list — they are much more than a year earlier. The richest of them — Vadim Moshkovich, the head of the group Rusagro, which controls 49% of the production of margarine in the country and is also one of the largest sugar producers and the largest owner of land in the country. In the past year, his group has increased turnover by 16.5% to 96 billion rubles. In conversation with Forbes Malkovich denied that sanctions had helped him. Investments — for example, in a greenhouse — is for ten years, but his business plan no one expected a decade of sanctions.

However, it is undeniable that the market value of his company in 2015 — the first year after the imposition of sanctions has increased three times, what did “Rusagro” the largest Russian company traded on the stock exchange. In economic terms, all feel better about the brothers Alexander and Viktor Linnik, each of them, according to Forbes, has a fortune of 750 million dollars. It belongs to the group Miratorg, the largest pork producer in the country, experiencing foreign competition. From the beginning they are, for example, supplying products to a network of Burger King.

While the oligarchs profit, the population suffers. The quality of Russian products significantly behind the Western products, the shortage of supply leads to higher prices for many everyday products. Sanctions and the import ban once again proved that such trade restrictions affect the welfare of the people without affecting the regime, says Moscow economist Konstantin Sonin. Mode, really, was not injured. Although Alexei Navalny, a Putin’s opponent in the presidential election next year, explains its late March, a demonstration against the head of the Kremlin, primarily poverty, but in reality the standard of living and real incomes of Russians has been declining for several years. On the other hand, the sanctions have gone into the hands of Putin, said Movchan. He can blame the economic crisis in the West. In addition, for the rich Russian has become more risky to hold as abroad, that gives Putin more control over them.

The Russian company over the years won not only the distancing from Europe and turn to China. The richest Russian is Leonid Mikhelson, who, along with Timchenko is the owner of the second largest oil producer NOVATEK and the largest petrochemical group SIBUR, to boost cooperation with China in the gas sector. In 2015 and 2016, Chinese investors entered the share of SIBUR in the amount of 20 percent. In particular, due to this, Kirill Shamalov, the owner of the stock of “SIBUR” and son of Putin, became a billionaire.

Although Michelson and would like to work again with the Europeans, but criticizes their behavior in the era of sanctions. “Americans check that they do not violate the sanctions, but continue to work with us further. Europeans only read ‘sanctions’ and NOVATEK and never come back” — quoted by the newspaper Neue Zürcher Zeitung billionaire in February of this year. It was a lot of unnecessary discussions with companies from Europe, although all contracts were signed before the imposition of sanctions. In informal conversations with European managers complained to him that their governments exert pressure on them, says Michelson. From the Americans he never heard.