The head of one of Russia’s largest banks likened the EU’s decision to extend the sanctions imposed on Russia to an act of economic war.
“We have quite a strong opinion on sanctions. Sanctions, in other words, are economic war against Russia,” Andrey Kostin, the CEO of VTB bank, told CNBC in Moscow on Thursday.
“Economic war will definitely have negative implications for the Russian economy, but more than that it will have very negative implications for political dialogue and security in Europe,” he noted, adding that sanctions were “the wrong way to treat Russia.”
On Thursday, the EU foreign ministers agreed to extend the sanctions against Russia by six months following some opposition from Greece. The EU foreign ministers have yet to reach an agreement on whether or not they will add new people and prepare new measures.
This latest round of sanctions are the EU’s response to the escalation of violence in Ukraine over the weekend when Russian-backed rebels launched an assault on the vital Ukrainian port city of Mariupol, killing 30 people and injuring 83.
The US and the EU have imposed multiple rounds of coercive sanctions on Russia since March 2014 in an effort to stop the state from further aggression in Ukraine.
The Western-imposed sanctions are part of a larger strategic geopolitical plan called “the weaponization of finance,” which Ian Bremmer defined as the “systematic use of carrots (access to capital markets) and sticks (varied types of sanctions) as tools of coercive diplomacy.”
The basic strategy is that Western nations impose sanctions on Russia, which they consider to be a “rogue” state, in an effort to force Russia to change its behaviour if it wishes to have the sanctions lifted or to have access to capital markets again.
The Russian economy has been seriously bruised over the past year, partially because of these Western sanctions and partially because of the oil price drop (which led to the ruble crisis).Consequently, it’s not surprising that Russian bankers and business owners like Kostin aren’t too keen on additional economic pressures.
There has even been some buzz that Russia might be blocked from SWIFT (which provides a network that enables financial institutions around the world to work together) if things further escalate in the Ukraine crisis. What that means, basically, is that Russia would no longer have access to the global financial system, which would put it in pretty much the same league as Iran.
“We have already created our system which can replace Swift,” Kostin warned at the Davos conference last week. “We are also in talks with partners from China. But I want to note that if this takes place, US-Russian relations will deteriorate sharply.”
“In fact, this is a situation on the verge of war or a Cold War… this is not a matter of VTB or banking system,” he added.
You can watch the whole CNBC interview over here.
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