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4 Aug, 2014 12:14

Ukraine plans to mirror Western sanctions on Russia

Ukraine plans to mirror Western sanctions on Russia

Within a few days Ukraine plans to impose measures against Russian companies working within its borders. The sanctions will affect the financial, energy and military sectors similar to those already imposed by the US and EU.

The Ukrainian State Fiscal Service has listed up to 1,000 entities with over 50 percent Russian capital, Kommersant cites a person in the Ukrainian government. However the sanctions will be imposed on only a part of the list, mostly those companies related to Russian state enterprises.

Experts suggest the measures have more of a political message and will barely affect the Russian companies in Ukraine.

There is no reason to expect the scale effect of sanctions, but Ukrainian businessmen will be forced to search for new markets and to reconfigure business structures so they are not connected with Russia,” Kommersant quotes Andrey Novak, the head of the Committee of Economists of Ukraine.

The first sanctions pack which is already informally approved by the Ukrainian government is similar to the measures put in place by the US and EU.

The sanctions will prohibit issuing the companies loans longer than 90 days. Additionally Ukraine will impose an embargo on the import and export of arms and related material to and from Russia. Also, the export of certain energy-related equipment and technology to Russia will be prohibited.

The second pack of sanctions, which is still under consideration may restrict Russian companies from participating in privatization tenders as well as prohibit Russian gas companies in the Ukrainian market.

The supply of oil and gas pipes, pumps and compressor equipment is insignificant and may be substituted by Russian versions, according to Kommersant citing people familiar with the oil and gas sector.

Lukoil and Rosneft, the major Russian players in the Ukrainian oil products market, declined to comment on the possible impact of sanctions. However, last week Lukoil agreed to sell all of its 240 gas stations in Ukraine to the Austrian AMIC Energy Management GmbH.

The subsidiaries of Russia’s state banks, such as Sberbank, VTB and Vnesheconombank, have a 12 percent share of the Ukrainian banking sector. The banks declined to comment on the possible impact of sanctions, but people familiar with the industry say the restrictions won’t affect business as the majority of the capital for the subsidiaries is within the Russian parent companies.