TEHRAN(Bazaar) –Shireen Tahmaasb Hunter, a professor of political science at Georgetown University, tells the Bazaar that Russian invasion of Ukraine has shown the drawbacks of Europe's, especially Germany's over dependence on Russia.
She says: “In the post -Ukraine era, Europe will try to reduce dependence on Russia and diversify its sources of energy imports.”
“There are differences of opinion among the EU members on the severity of response to the Russian aggression,” Hunter comments.
Following is the text of the interview:
Bazaar: What are the economic consequences of the Ukraine crisis for Russia and Europe? Will Europe not face the problem of energy imports?
Hunter: The Ukraine crisis certainly will have a negative impact on Russia's economy as well as that of Europe. The volume of trade between the EU and Russia is very high. Close to half of Russia's exports goes to the EU countries. The seriousness of the impact on Russia would depend on the extent of sanctions and their duration. The immediate impact might not be too strong, but if sanctions continue for a long time, it could have very deleterious effects on Russia. The reduction in the export of Russian energy would also damage European economies by delaying their recovery from the effects of the Corona epidemic. In particular higher energy prices could push the rate of inflation to high levels.
Bazaar: Following the Russian invasion of Ukraine, the United States announced the possibility of Russia cutting ties with Swift. What effect will the severance of Russia from Swift have on Russia's foreign trade and to what extent will it affect its economy?
Hunter: At the moment, no decision has been made on excluding Russia from SWIFT. Many European countries would be hesitant to go that far. But, if they decide to exclude Russia from SWIFT, the Russian trade and thus economy would suffer.
Bazaar: Europe imports energy from Russia. Russia's disconnection with Swift will make it difficult for European countries to import fuel from Russia. In such a case, is it possible that the United States will not impose sanctions on European energy imports from Russia?
Hunter: It is early to say what kind of sanctions will be imposed on Russia. However, limiting Russia's energy exports to Europe will be in the mix. Russian invasion of Ukraine has shown the drawbacks of Europe's, especially Germany's over dependence on Russia. In the post -Ukraine era, Europe will try to reduce dependence on Russia and diversify its sources of energy imports.
Bazaar: Russia has established the System for transfer of financial messages (SPFS), a Swift-independent financial system since 2015. There are about 20 Russian banks operating in the SPFS, and it seems that the presence of foreign banks in it is also needed at the moment. Can this system smooth Russia's foreign trade?
Hunter: At the present time, alternatives to established forms of financial transactions are not very effective. This rule applies to the Russian alternative to SWIFT. However, as I mentioned above, at the moment no decision on excluding Russia from SWIFT has been taken.
Bazaar: Germany has good economic relations with Russia and opposes extensive sanctions against Russia. Does Europe have a consensus on sanctions against Russia?
Hunter: There are differences of opinion among the EU members on the severity of response to the Russian aggression. The Baltic states and Poland, with a long history of Russian aggression and occupation, want a strong response. But other countries, including Germany, could be inclined towards a more lenient approach. However, in view of Germany's own past history in Europe, the Germans will go along with whatever decisions are worked out in the EU and with the US.
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