A shot in the leg: Russia's sanctions can not harm the US and the European Union

Developed by deputies of the State Duma, the bill hits first of all on the Russian population and business.
A week after the US Finance Ministry introduced new sanctions against Russian officials and businessmen, State Duma deputies proposed their variant of counter-sanctions. The bill on retaliatory measures introduced by the chairmen of all the factions headed by State Duma Speaker Vyacheslav Volodin allows the government to introduce a number of prohibitions - from the importation of medicines into Russia to hiring foreigners. The government proposed to choose from this set, and the president should approve the restrictions, the bill says. They will be introduced against the US and other countries that have approved sanctions against Russia.

Pay, however, for counter-sentiment will not foreigners, and residents of Russia and domestic business. For example, the health of the population will be hit by a ban on the import of drugs, analogues of which are produced in Russia or in countries that have not joined the sanctions. According to the DSM Group, the share of imported drugs on the Russian market in 2017 exceeded 70% (data on how much of them are unmatched, no). Companies from the United States accounted for 28% of the market in money terms and 8% of public procurement, said the head of Quintiles IMS Russia and the CIS Nikolay Demidov. The state, however, and so basically buys cheaper domestic counterparts, if they are available. But the patient buying drugs for his money, will be deprived of a choice, says CEO of the DSM Group Sergei Shulyak, the ban will hit not by American producers, but by Russian consumers.

In the US, counterforce sales are unlikely to affect: Russia's share in the supply of US medicines does not exceed 3%, Demidov said, in the medium term, the US can easily redistribute supplies to other developing countries, for example, Brazil.

 $ 23.1 billion

This was the trade turnover between Russia and the United States, of which $ 10.6 billion was for export, and for imports - $ 12.5 billion. Part of the measures of the bill and does not affect any Russian consumers and companies, or foreign. For example, Russians will not notice a ban on imports of American tobacco products: all corporations have localized cigarette production in Russia, says Maxim Korolyov, head of the Russian Tobacco industry agency. A small share of niche products, such as cigars and cigarillos, is supplied to Russia. Prohibition of purchases of foreign technological equipment and software (state companies are limited in its purchases as from January 1, 2016) can be circumvented, for example, justifying the need for certain characteristics of Microsoft or Oracle, says MDG Group CEO Dmitry Dyrmovsky (part of the expert council on Russian software at Ministry of Communications). And a complete ban on the purchase of the American software is simply impossible now, he is sure, to immediately give up already purchased licenses that used for many years, too expensive and practically impossible in practice. The infrastructure of some state bodies was built on Western programs and equipment for 20 years, Alexander Chachava, the managing partner of the LETA Capital foundation, agrees, an immediate refusal of them can disrupt the work of entire departments.

Russian business will also suffer from counter-sanctions, especially from the ban on the export of rare metals. The world's largest titanium producer - Ural's VSMPO-Avisma - is afraid to lose the market forever. "Violation of cooperation ties, unfulfilled business obligations can for a long time, if not forever, rip out our company from a dynamically developing titanium market. In addition, in the Urals region more than 20,000 employees will find themselves in a crisis situation, "the company said in a statement. However, foreign business will also suffer. Most of all - Boeing and Airbus. In the near future, VSMPO-Avisma products will have nothing to replace, says Maxim Khudalov, director of the corporate ratings group of ACRA.

Limiting exports of palladium (Norilsk Nickel is the world's largest producer) may temporarily destabilize the market, but this deficit will be able to replace the Zimbabwean and South African producers, Khudalov said. Mechel is supplying to the American market forging and stamping for engines, the refusal of their supplies will temporarily worsen the situation in the American industry, but it can destroy the economy of the Urals, Khudalov concludes. The response sanctions in the sphere of industry will hit first of all in their own economy, the general director of Sputnik-Management of Capital Alexander Losev agrees. Representatives of Norilsk Nickel and Mechel did not respond to the request.

The business and other measures proposed by the deputies are afraid of - the permission to produce goods without the consent of the rightholders: it actually legalizes gray imports, says a member of a large technology company. Permission to assign brands and patents is worse than to shoot yourself in the foot, warns Professor NIU HSE Oleg Vyugin, if the country does not recognize the right to a patent, how can you invest in it under your brand.

Strike on Russian business and a ban on foreigners to provide legal and consulting services in Russia. It may be necessary to leave the Russian market, the managing partner of a large foreign law firm warns, any scheme of work - for example, subcontracting Russian law firms - will increase the cost of services. First and foremost, customers will suffer, the employee of a large chemical company is sure: the rise in prices for services is an inevitable consequence of a decline in competition.

The only serious blow to foreign business will be an increase in fees for flights over Russia. The way from the US to Southeast Asia and vice versa is the busiest freight direction, it accounts for 50% or more of international shipments by American airlines, the top manager of the Russian cargo carrier says. The share of air navigation fees in the cost of a freight carrier is 5-7%, this measure would really hit their business, Vedomosti's interlocutor continues. According to the Bureau of Transportation Statistics of the United States, in 2017, 35% of the international traffic flow of American airlines fell on the direction of the United States - the Pacific region, the region's share in the freight turnover (a measure that takes into account the amount of cargo and distance) - 40%.

 There is nothing to answer.

Seriously to respond to sanctions without hitting Russian consumers, one can only limit the export of gas and oil, says Natalia Volchkova, professor at the Russian School of Economics, the structure of the Russian economy does not allow serious damage to EU countries and the US otherwise. Formally, Russia's share in global chains exceeds 38% (the same as, for example, Saudi Arabia), but it is ensured only by raw materials exports, according to the report of "Structural Changes in the Russian Economy" by the HSE experts led by the Higher School of Economics Evgeny Yasin. Russia's participation in world trade chains through the processing of imports is only 13%, while half of these products fall on three sectors: the extractive industry, processing of energy resources and metallurgy. 86% of the goods exported from Russia are used by other countries in the production of exported products, the reverse dependence is minimal - 14%, the Central Bank cited the OECD estimates.

Imported products are consumed mainly in Russia and do not enter the world market, explains Alexander Knobel, director of the Center for International Trade Studies of the Russian Academy of Science and Technology. But with such trade, the competitive potential of non-Russian companies is growing, and the buyers of Russian raw materials, ie, potential competitors of Russia on the world market in the sphere of high-tech products, are warned by the HSE experts. For the years 2005-2011. Russia's share in world exports of such goods fluctuated at the level of 0.15-0.19% and, although from 2012 it increased to 0.24%, as early as 2016 it decreased to 0.2% (mainly due to falling of export of such goods to the USA, Germany and Ukraine), they estimated. Russia's share in world exports of high-tech services is higher - 0.87% in 2016, but this is not enough to actively include Russia in international trade chains.

In such conditions, it is necessary to respond in an unconventional way, Volchkova suggests, for example, to remove all restrictions on foreign investment in the economy, to simplify the conditions for localization in order to attract foreign technological, educational, financial resources to the economy as much as possible. And the answer proposed by the State Duma beats on its own economy, she warns, in the long term Russia will lose important niches in the world market. Counter-sentences, introduced as early as 2014, already cost the economy, according to various estimates, 1-1.5 percentage points of GDP growth, notes Knobel. Only because of the food embargo for 13 commodity groups consumers lost more than 280 billion rubles. (2000 rubles per person per year), and the economy - 31 billion rubles., estimates Volchkova. In April 2016, economists of the Russian Academy of National Economy and the Public Service came to the conclusion that the Russian embargo was ineffective: exports of these countries to Russia decreased by 66% between 2013 and 2015, while the total reduction in food exports in these countries was only 7 %.