European Union and economic consequences of the Russian – American rivalry

Europe’s economy is vulnerable to ripple effects from the crisis in Russia and Ukraine.

As the European Union, the U.S. and Canada look to take coordinated action to pressure Russia to back off its annexation of Crimea, economists at Morgan Stanley and Deutsche Bank AG released reports yesterday analyzing the potential for fallout on Europe’s economy should the crisis spread.

The impact could be transmitted through finance if Russia grabs assets or if the creditworthiness of its assets declines, said Gilles Moec and Marco Stringa, London-based economists at Deutsche Bank. Among other channels, world trade may be roiled by a drop in Russian imports or if Russia holds back exports of its energy.

“On all these counts, the European Union would come firmly first among those affected,” said Moec and Stringa.

Using data from the Bank for International Settlements, Deutsche Bank noted French banks are the most exposed, with $51 billion in claims over Russia in the third quarter of last year. As a share of total bank assets, Austria has the highest ratio at 1.4 percent, followed by the Netherlands and Italy.

The share of euro-area foreign direct investment assets held in Russia were 3 percent of the total in 2012, according to Morgan Stanley economist Olivier Bizimana in London.

If trade took a hit, then euro-area merchandise exports to Russia might fall from the 2.5 percent of total shipments in 2013, said Bizimana. Germany is the most exposed: about 3.3 percent of its exports head east.

On energy, Germany gets one-fifth of its coal and a quarter of its oil from Russia, while Finland gets 100 percent of its natural gas and more than two-thirds of its oil from there, said Moec and Stringa.

“In order for European growth to be materially impacted, an extreme scenario would need to unfold with a deep recession in Russia — similar to what was seen at the time of the Ruble crisis in 1998 — and large spillover to the eastern part of the European Union,” said the Deutsche Bank economists. A more likely risk would arise if uncertainty spread in Europe when emerging markets are already wobbling, they said.

An economic downturn in Russia would also shave the foreign affiliate sales of euro-area companies, which on average generate 1.5 percent of their revenue from the Russian market, said Bizimana. France’s Danone and Adidas AG of Germany are among the most exposed.

Europe also has “little room” in fiscal and monetary policies to respond if there were a downturn in external demand, said Bizimana.

INFLUENCE OF SYRIAN WAR ON THE ECONOMIC CRISIS IN EUROPEAN UNION

The Syrian Civil War, also known as the Syrian Revolution, is an ongoing armed conflict taking place in Syria. The unrest began in the early spring of 2011 within the context of Arab Spring protests, with nationwide protests against President Bashar al-Assad’s government, whose forces responded with violent crackdowns.

The armed opposition consists of various groups that were formed during the course of the conflict, primarily the Free Syrian Army, which was the first to take up arms in 2011, and the Islamic Front formed in 2013. In 2013, Hezbollah entered the war in support of the Syrian army. In the east, the Islamic State of Iraq and the Levant (ISIL), a jihadist militant group originating from Iraq, made rapid military gains in both Syria and Iraq, eventually conflicting with the other rebels. By July 2014, ISIL controlled a third of Syria’s territory and most of its oil and gas production, thus establishing itself as the major opposition force.

Above mentioned war has also big influence on the ongoing economic crises in Europe. European Union is trying to solve its economic problems using very restrictive economic measures in its member states but economic problems are still on the surface.

Huge number of refugees who are travelling through Balkan region in order to find better and human conditions for life are the new problem of European states. Syrian refugees want to start their new life in European Union states which will allow them peaceful and sustainable future.

Currently, European Union with very serious economic problems, has no alternatives and strategies how to deal with new refugee problem. There is no cooperation between European states on this question, and, also, they are not able to face with it.

Syrian refugees are travelling to European states through region of Western Balkan. Serbia and Macedonia, as a transit states, also have huge problems in this area. They are trying to find acceptable solution, and in cooperation with European Union they are working on it.

This kind of question is not isolated problem for only several states, but open question for whole European continent. Because of that, we, participants of NaisMUN conference, will try through fruitful debates and discussions, to find solution that will allow better conditions for above mentioned people and, also, sustainable economic treatments for vulnerable state.

We will try to answer the question how to deal with economic crisis and refugees in this conditions and how to create strategies acceptable for all interested sides.