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We judge the impact and effectiveness of sanctions based on a range of economic and
political factors. Sanctions are designed to impose a cost for Russia’s actions in
Ukraine, deter further escalation of this crisis, and support the wider diplomatic
effort. EU measures already announced have exacerbated negative trends in Russia’s
economy; capital flight in the first half of 2014 was greater than for the whole of
2013; and we have seen a significant reduction in expected growth. Russian access
to western financial markets will be severely constrained as lenders consider the
risks of Russian exposure in the current climate. The strengthening of sanctions should
signal clearly to the Russian leadership that their policy of trying to destabilise
Ukraine will have a cost for the Russian economy. The EU’s measures have in-built
review mechanisms. The sanctions implemented on 31 July are in force for one year,
with a review of implementation after three months.
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