Economic Sanctions Harvard Case Solution & Analysis

1.0.         Introduction

The Russian-Ukraine conflict started with a small protest in November, 2013 against abandoning a trade agreement with EU. This protest turned into demonstration, clashes and ultimately, the government was overthrown. The pro-Russians also got involved into the conflict and Russia moved to protect Russian interests. This led to sanctions by the EU and the US which startedin March, 2014(BBC, 2014).

2.0.         Brief Analysis

The sanctions on Russians were put in place to disrupt a military adventure of Russia to occupy Crimea.The sanctions were put on Russians and businesses including travel bans and assets freezing (BBC, 2014). The Russian state bank was also restricted from raising any long-term loans. Additionally, it was banned to export some oil industry technology and services, military equipment and any future European arms deals were also banned. Some of the major organizations were affected by the sanctions are Volga Group, Novatek, SMP Bank, Rosneft and so on. The space technology, gas industry and nuclear energy were excluded from the sanctions (BBC, 2014).  The case cannot be considered as a complete success due to the fact that conflict is still ongoing in the region.

3.0.         Economic effects on U.S. and E.U.

Russia is considered to be a major player in the international economy with a population of 140 million and being a ninth (9) largest economy in the world. Additionally, it is one of the biggest exporters of oil and gas (Nelson, 2015).

3.1.           United States

The direct trade between the US and Russia is relatively small. The Russian exports to the US are around $7.8 billion with 2.7% of the total exports, whereas, imports amount to $16 billion (5.6% of total imports). The US investments in Russian Stocks amount up to $18.6 billion and loans to Russian banks add up to be $26.16 billion. On the other hand, US exports of goods to Russia were just 0.71% and imports were 1.19% (Nelson, 2015). In the big picture, these figures show that both the countries have limited trade and investment ties with each other.

The situation might be different for companies involved in imports and exports from both countries. Many large companies are involved with Russia in terms of exports, joint ventures and supplies. Exxon Mobil and Rosneft had signed a strategic agreement of billions of dollars. Pepsi Co., Ford Motors and General Electric also have considerable business partnerships with Russia. The US Russian Business Council consists of 130 U.S. companies having business in Russia.  U.S. and Russia rely on each other in some of the industries as well. The U.S. has mostly relied on Russian rocket technology for civilian and military space programs. Additionally, some of the metals are supplied by Russia as well (Nelson, 2015).

In retaliation to the US sanction, Russians banned some food items from US, Europe, Australia, Norway and Canada for one year. Additionally, the Russian government started a crackdown on McDonald’sin Russia. It considered banning export of Russian rocket engines to the US (Nelson, 2015).

3.2.           Europe

According to a study by Austrian Institute of Economic Research(WIFO), the European economy lost €100 billion in total due to the sanction in Russia. It also risked the jobs of 2 million employees working in Europe. Germany faced biggest impact with 465,000 jobs at risk and possible economic loss of 1.6%. The impact was higher on smaller countries like Estonia, which faced a decline of 16% in revenues from exports due to the sanctions (Sharkov, 2015).

Due to the retaliation of Russians, the European food exports to Russia were largely affected. The exports of over one billion Euros from the exports of 300,000 tons of cheese have been stopped (Euronews, 2015).Economic Sanctions Case Solution

4.0.         Conclusion

Although the overall impact of sanction on US and Europe is minimal however, some of the sectors and organization will face major financial problems due to these sanctions. It hada lasting effect on the regional economy, particularly, Europe.It also faced major unemployment wave due to the sanctions. Germany faced the worst impact in this case. The US faced particular problems in imports of rocket engines and food items. Exxon Mobil, General Electric, Ford motors and Pepsi Co had agreement with Russian companies, which affected these organizations financially......................

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