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Saturday 20 September 2014

Europe accused of 'shooting itself in the foot' with Russia sanctions

Published 16/08/2014 | 00:00

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Viktor Orban
Viktor Orban

The European Union has harmed itself economically with the sanctions it has imposed on Russia over Ukraine, Hungarian Prime Minister Viktor Orban said yesterday, calling for a rethink.

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Orban's remarks came a day after his Slovak counterpart, Robert Fico, criticised the sanctions as "meaningless", saying they would threaten economic growth in the 28-member bloc.

"The sanctions policy 
pursued by the West, that is, ourselves - a necessary consequence of which has been what the Russians are doing - causes more harm to us than to Russia," Orban said.

"In politics, this is called shooting oneself in the foot."

Export-driven Hungary is heavily reliant on energy imports from its former Communist overlord and early this year Budapest agreed with Russian power firm Rosatom to expand Hungary's only nuclear plant in a €10bn deal.

Russia is also Hungary's largest trading partner outside the European Union, with exports worth €2.55bn last year. "The EU should not only compensate producers somehow, be they Polish, Slovak, Hungarian or Greek, who now have to suffer losses, but the entire sanctions policy should be reconsidered," Orban said.

EU foreign ministers held an emergency meeting yesterday to discuss conflicts in Ukraine and Iraq.

Orban had already signalled opposition to economic sanctions against Russia for fear of damaging the domestic economy. Yesterday, he said he would seek ways to facilitate a rethink.

"I will do my utmost - of course we are all aware of Hungary's weight, so the possibilities are clear - but I am looking for partners to change the EU's sanctions policy, which I think has not been considered thoroughly enough," he said.

Hungary's Agriculture Ministry said on Tuesday that farming exports would not be harmed significantly by a Russian import ban on a range of foods from the EU.

Amid weaker growth in the EU's east, Hungary was among the bright spots, with Thursday's preliminary GDP figures in Slovakia, Bulgaria and 
Hungary all better than 
expected, led by the latter's 0.8pc quarterly expansion.

It comes as stock index compiler FTSE launched four new indexes that exclude Russia. The move follows western sanctions against several Russian companies which had already led another index compiler, MSCI, to produce new indexes that exclude Russia, in response to investor demand.

Possible moves by index compilers to exclude Russian companies from major indexes have caused jitters among investors in Russian stocks, as many funds use the composition of these indexes to determine their portfolio weightings.

Analysts at Russia's VTB Capital said that the launch of the new FTSE indexes was unlikely to be consequential 
for the Russian stock market unless US fund manager Vanguard, the major investment company that follows FTSE's indexes, decided to switch. (Reuters)

Irish Independent

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