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Slovakia to feel Russia sanctionsDefence most vulnerable, biggest bite comes if penalties prove long term
4 Aug 2014 Michaela Terenzani and Beata Balogová with press reports Politics & Society
SLOVAKIA might feel the impact of sanctions against Russia if they last long, analysts agree and the country’s defence capabilities might suffer most.
The European Union and the United States imposed a third round of sanctions against Russia on July 29. The recently announced sanctions are considered the toughest since the Cold War, and now in addition to specific individuals or organisations directly target entire sectors of energy, banking and defence.
In Brussels, ambassadors from the 28-member EU bloc agreed to restrictions on trade of equipment for the oil and defence sectors, and “dual use” technology which have both a defence and civilian purpose, the Reuters newswire wrote. Russia’s state run banks would be barred from raising funds in European capital markets.
No Slovakia-based banks involved
In Slovakia, the local branch of Sberbank as a branch of the Russian Sberbank has been mentioned in connection with the sanctions.
“For the moment it is not clear what exactly the sanctions are,” Martin Barto, the main strategist of the bank said, as quoted by the Sme daily.
On July 30, the National Bank of Slovakia (NBS), country’s central bank, gave an official statement to the sanctions, stating that the sanctions are only related to the big, state-owned Russian banks.
“The sanctions are thus not related to their daughter companies that are active in Europe,” NBS wrote in the statement, adding that there is no bank active in Slovakia that would be subject to sanctions.
The economic impact
For Slovak exporters, Russia is a business partner and the Slovak economy could feel the pinch if Moscow took counter-measures. Should Slovakia’s exports to Russia drop to half of today’s volume, Slovakia could suffer a short-term loss of up to 2 percent GDP, economist Peter Havlik from the Vienna Institute for International Economic Studies told the public-service Slovak Radio (SRo).
The sanctions will directly affect a number of Slovak companies, like automotive plants. About 5 percent of Slovakia’s exports go to Russia, SRo reported. The damages could however be larger if Slovak companies who act as sub-contractors for larger companies exporting to Russia are included, Peter Mihók, head of the Slovak Chamber of Commerce and Industry (SOPK) told SRo.
The exact impacts of the sanctions on Slovakia cannot be assessed due to the specific focus of these sanctions, Ministry of Economy spokeswoman Miriam Žiaková told the TASR newswire.
The impacts will also depend on whether sanctions in the financial sphere will cause problems in contracts that are co-financed by Russian banks as well as secondary impacts of possible changes of trade flows within the European Union, Žiaková added.
The spokeswoman however refused to comment on speculations on possible hike to prices of energy linked to Russia.
Impact on defence
Media have recently devoted numerous reports to Slovakia’s dependency on Russia in the defence sector, which is also subject to the most recent round of sanctions.
Slovakia purchases spare parts for the maintenance of its radar system from a Russian company that is to be subject to sanctions. Buying the radars from an alternative supplier might prove a problem for Slovakia, the Pravda daily reported.
Complications could be expected if Slovakia’s air force does not have enough supplies of spare parts on stock at the moment, former head of defence of Slovakia’s standing delegation at NATO, Jaroslav Naď, told Pravda.
“There can be a temporary problem to secure the protection of air space with monitoring radars,” Naď told Pravda.
The Defence Ministry did not comment on these concerns, saying that the embargo on arms has not been officially introduced as yet.
While all post-communist countries could have problems due to the sanctions, Slovakia and Bulgaria are likely to be hit the most, according to Naď.
Slovakia’s armed forces currently operate twelve MiG-29 jet planes, a squadron of Mi-17 helicopters, radio-locators and the S-300 anti-aircraft defence system, all made in Russia, Pravda reported. Many of the parts included in regular maintenance of such equipment also come from Russia.
Meanwhile, Interior Minister Robert Kaliňák told the Sme daily that the situation at Slovakia’s borders in terms of refugees is unchanged since Ukraine is not a small country and the conflict is still physically distant, meaning other countries would likely feel any refugees crisis first.
“We do not feel any pressure on our borders,” Kaliňák said, adding that there was an increased activity in the area of undocumented migration but not Ukrainians. “We wish for this conflict to be over because it does not only have economic consequences but also innocent victims, as you have seen.”
Kaliňák refused the claim that Slovakia has been soft in its statements towards Russia and the sanctions.
“We have made statements similar to Germany,” Kaliňák told the press as featured on a video published by Sme, adding that Slovakia has always made an effort to be in the middle of what he called “the EU stream”.
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