EU agrees new sanctions against Russia, targeting companies suspected of circumvention

The European Union agreed on Wednesday to slap Russia with a new raft of sanctions in response to the invasion of Ukraine.

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[MaleAdaptor]

Sanctions for Russia means more misery for the Europeans.

[nicktrevi]

If we need 11th package, does it mean, the first ten are working properly? ❤

[Nico-rwuo]

Each target results in Russia supermarkets full of stocks, full if cash, full of gas .

[Factsagainstpropoganda]

😂😂😂… what about sanction 1.
Does that came into action😂😂

[TheRealBillBob]

Suspected? Thank goodness they aren't in charge criminal prosecutions. Can you imagine them only needing to suspect you of doing something and then lock you up without any proof? Maybe it's headed that way for the EU subjects (not citizens).

[nmgirard]

It not sanctions that are needed, in this case anyway.

[biswanathmukherjee]

Do you, the EU, stop purchasing atomic fuel from Russia?

[cgliuus]

europe sanction won't work on russia because russia is a Superpower😁

[Habits]

Oh... For sure now will work. My lord our leader are good.

[Kohen]

I hope they are sanctions as strong as the ones they applied in North Korea or Cuba.

[luckyea]

*Economy of the Russian Federation*

Russia's GDP growth in May 2023, according to the Ministry of Economic Development, amounted to 5.4% year-on-year after an increase of 3.4% in April, according to the ministry's review "On the Current Situation in the Economy" published on Wednesday.

The main support for the economy in May was provided by manufacturing, wholesale trade and the construction sector.

The main positive contribution to the growth of manufacturing output, as in the previous month, continued to be made by the machine-building and metallurgical complexes (+7.1 percentage points and +3.1 percentage points, respectively).

The machine-building sector became the main growth driver. All divisions of the complex show good results: the production of computers and electronic equipment grew by 31.5%, electrical equipment - by 49.5%, the production of motor vehicles increased by 86.3%.

“The economic program announced by Vladimir Putin in his message creates an opportunity for the Russian economy to quickly move to growth rates of 7-10% per annum. Moreover, we believe that as early as 2023‒2024, the Russian economy can show GDP growth of 4‒6%, ” the Expert publication estimates the possible economic growth rates.

The Expert publication also noted that the reasons for such growth are structural in nature: “The structural changes in the economic system of the Russian Federation themselves are obvious. This is an active import substitution in the manufacturing sector of the economy. It has been going on for more than a year, it accelerated sharply in 2021, after overcoming the covid crisis, and gained an incredible, still unconscious pace last year. The second shift is a turn to the East. There is also an obvious increase in export flows to Asia, Africa, and the Middle East.”

It was also noted that “the third shift is less noticeable - which began only in the second half of 2022, the change in the structure of the country's internal income in favor of a wide range of citizens. It is associated primarily with a sharp increase in demand for labor resources and the subsequent increase in wages. Finally, the fourth source of structural shifts is the accession of new regions, investments in these regions and the development of their industry and agriculture.

According to the results of April, the salaries of citizens of the Russian Federation increased by 10% in annual terms!

In May 2023, the inflation rate in Russia amounted to 0.31%, which is 0.07 less than in April 2023. At the same time, inflation since the beginning of 2023 amounted to 2.38%, and on an annualized basis - 2.50%.

In 2023 Russia ranks 1st in terms of inflation in the world.

For the first time since 2014, Russia has returned to the top ten largest economies in the world. At the end of 2022, Russia produced goods and services worth 2.3 trillion dollars, which allowed it to take eighth place in this indicator. The last time the country was in the top ten in 2014 was ninth with a GDP of $2.05 trillion. In 2021, she was ranked 11th.

The combined wealth of Russia's richest entrepreneurs has grown by $16.573 billion since the beginning of the year.

In 2022, there were 22 more billionaires in Russia. For the second year in a row, the number of rich people around the world has been declining, but in Russia there are more and more of them. The combined wealth of Russian billionaires has grown from $353 billion to $505 billion.

*EU economy*

Eurostat estimates show that the euro area has entered a recession in the first quarter of 2023. This is the second quarter in a row that the zone's GDP has declined by 0.1% year on year.

Data from the EU statistics agency on economic growth dynamics show that the decline in euro area GDP in the fourth quarter of 2022 and the first quarter of 2023 was 0.1% year on year.

Thus, as Eurostat points out, the consecutive economic recession for two consecutive quarters shows that the euro area "is in a state of technical recession."

The GDP of the largest EU economy Germany in January-March 2023 decreased by 0.3% qoq, and in October-December it again decreased by 0.5%, which means a technical recession. Earlier, the International Monetary Fund (IMF) published a forecast according to which the German economy will stagnate until the end of 2023.

What is happening with the European economy is caused by a complex of reasons. First of all, the development of the recession was affected by the refusal of Russian energy carriers - oil, gas and coal. Russian hydrocarbons were replaced by supplies from third countries, which, as a rule, trade in more expensive raw materials.

Another factor in the decline of Europe is deindustrialization. It is due to the fact that more and more companies, especially those producing high added value, are moving overseas, or to the Middle East and Asia.

There are three main economic factors - labor, land, capital. What's going on with difficulty? More and more Europe is flooded with emigrants, including from Ukraine. They tend not to work, their choice is to live on benefits and consume. Undoubtedly, this negatively affects budget expenditures, which could be redistributed in the direction of supporting the economy, rather than issuing funds for consumption.

Capital can be physical, or it can be intellectual. In Europe, it dries up because investments do not pay off. Physical capital is aging in every sense, and intellectual capital is migrants.

The capital remains in Europe, but the dividends go to third countries. For example, Volvo is already, in fact, a Chinese company, and the money, accordingly, goes to China.

According to a preliminary assessment by Eurostat, in May the business climate index in the euro area fell to its lowest level in the last two years. The most pessimistic mood today prevails in the European industry, where the level of business activity has been falling for 11 months in a row. One of the main reasons for the observed dynamics could be the rupture of economic ties with Russia, experts are sure. The ban on the supply of equipment and technology to the Russian Federation, introduced as part of the sanctions policy, hit EU manufacturers hard, while the refusal to purchase energy resources from Moscow led to inflation in Europe. For the first time in many years, authorities in the region resorted to raising interest rates to combat rising prices, which further complicated the work of local businesses, experts say.

Inflation in the eurozone in April 2023 accelerated to 7% in annual terms, according to preliminary data from Eurostat. In March of this year, this figure was 6.9%.

The lowest inflation rates were recorded in Luxembourg (2.7%), Belgium (3.3%) and Spain (3.8%), the highest – in Latvia (15%), Slovakia (14%) and Lithuania (13.3%). %). It was 7.6% in Germany, 6.9% in France and 8.8% in Italy.

According to the latest Eurostat calculations, in March 2023, industrial production in the euro area decreased by 4.1% compared to February. At the same time, the output of capital goods, such as machinery, machine tools and equipment, sank most noticeably (immediately by 15.4%). The main reason for such dynamics was the consequences of breaking economic ties with Russia, Natalia Milchakova, a leading analyst at Freedom Finance Global, believes.

“More than half of Russia's imports from the EU accounted for machine tools and industrial equipment. Against the background of the imposed restrictions, many permanent exporters in the Russian Federation were forced to stop deliveries of their products to Russian customers. Therefore, the decline in the European capital goods industry is a direct consequence of the sanctions against Moscow, ” Milchakova explained.

Sanctions increased revenue and demand for the products of Russian companies within the country. For example, Moscow manufacturers increased their output of machine tools for metalworking by 2.2 times.

*US economy*

Andrei Klepach, Chief Economist of VEB.RF, spoke in an interview with RBC during the recent St. Petersburg International Economic Forum (SPIEF) with a prediction that the economic recession in the United States is inevitable and may begin as early as the fourth quarter of this year. “They had a negative two quarters last year, now the economy is growing, but I think that with a high probability there will be a recession at the end of the year, the fourth quarter, and the beginning of 2024. Whether it will be long-term, or whether it will still be such a small correction, it is difficult to say now. I think that they cannot avoid a recession, ” he said.

In the United States itself, the same picture is on the horizon. In particular, the Fitch rating agency expects a mild recession in the US economy in the fourth quarter of 2023 - the first quarter of 2024.

Over the past two days in the United States, 7 large companies have already declared bankruptcy. The current period is the most active period of bankruptcies since 2008 for companies with liabilities of at least $50 million.

The U.S. is experiencing a record surge in bankruptcies that has markedly exceeded the maximum insolvency rate recorded at the height of the pandemic. At the end of February 2023, the number of registered bankruptcy filings of enterprises in the United States exceeded that of June 2020 by 73%. At the same time, the number of bankruptcies among large enterprises increased by 83%. In total, over 31, 000 companies filed for bankruptcy in February 2023.

The rapid growth in the number of bankruptcies results in massive staff reductions. According to Forbes, mass layoffs in the United States in 2022 were carried out by 1, 051 companies that laid off 161, 000 workers in total. At the same time, for the period from January 1 to March 15, 2023, American companies laid off 139 thousand people.