EU Sanctions Shut Down Russian Airline

EU Sanctions

EU sanctions are being credited for the shut down of a domestic Russian airline. Today, the Russian government announced the closure of operations for Dobrolet, a domestic air service operating from Moscow. Dobrolet (Добролёт) is wholly owned by Aeroflot (Аэрофлот), the state-owned and national airline of Russia. Aeroflot was the state airline of the Soviet Union, and still uses the airline industry symbol, SU, which stands for “Soviet Union.”

Aeroflot blamed the EU sanctions for the closure, indicating that sanctions had cut off access to needed funding. EU and U.S. sanctions on Russia have targeted the banking industry, large Russian companies with ties to the government, and high level individuals. In public, the Russian response has been to brush sanctions aside, saying they will have little impact, and instead will serve as an impetus for Russian industry to become more productive and self-reliant.

There are indicators that sanctions are impacting the Russian economy. The Russian stock market, the MICEX, fell 21 percent earlier this year according to CNN Money. So far, the MICEX is down four percent on the year. Russia’s currency, the ruble, has experienced fluctuations versus the dollar, losing almost six percent of its value this year. The current exchange rate is 35 rubles to one dollar, a sign that inflation may soon plague the Russian economy.

EU Sanctions Aeroflot debuted Dobrolet as a domestic subsidiary in late 2013, and the first flights began in May of 2014. Operating from Moscow’s Sheremetyevo International Airport (IATA: SVO), Dobrolet planned daily service by mid-August to the Russian cities of Kazan, Perm, Samara, Surgut, Ufa, Volgograd, Yekaterinburg, and the city of Simferopol in Crimea. Before the closure, the airline had established regular service to Simferopol, and the southern Russia city of Volgograd. (The city of Volgograd was formerly named Stalingrad until the period of de-Stalinization, a series of Soviet reforms introduced by Nikita Khrushchev after Stalin’s death.)

The news that EU sanctions have shut down a Russian airline lends credence to a report published in the Moscow Times newspaper, “The impact of the EU’s latest and harshest sanctions on Russia will be felt most keenly in the country’s economic sectors….” Experts say that Russian industry relies heavily on Western state-of-the-art technology, from airline sectors to the production of natural resources.

Dobrolet began operations with a fleet of three airplanes: one Sukhoi Superjet 100, and two Boeing 737-800 NG planes. The company had planned for the delivery of new 737 passenger jets from Boeing later this year. On Sunday, the Dobrolet website posted a banner display that reads, “Due to EU sanctions…we have to suspend all flights from August 4th.”

With sanctions in place by the EU and the U.S., Russia is finding it difficult to obtain technology and funding. Even Russia’s neighbors offer little help. The common Russian term for nearby countries is the “near abroad,” but except for fellow Customs Union trade bloc nations (Belarus, Kazakhstan, and Armenia), and those are substantially poorer nations than Russia, none of the other nations in Russia’s backyard seem willing to help. Neighboring countries like Finland, Poland, the Baltic States, Bulgaria, the Czech Republic, Slovakia and Moldova appear eager to throw off Russia’s imperialistic past. Just recently Russia announced a ban on Polish fruit and vegetables in response to Poland’s participation in EU sanctions.

Russia’s largest neighbor, Ukraine, shares a common history in Russia’s founding, but Ukraine, still reeling from the annexation of Crimea, is in conflict with Russia over support for rebels in the east of Ukraine. For numerous years Ukraine has produced many of the military items needed by the Russian armed forces. This arrangement was a hold-over from Soviet production practices, but Ukraine announced in June that it was cutting military ties with Russia. At the time, Russia’s deputy prime minister, Dmitry Rogozin, admitted that it would take two years for Russian industry to replace the manufacturing of those items.

The BBC estimates that nearly 45 percent of Russia’s exports go to Europe, yet less than three percent of products imported by Russia are from the EU. The fact that EU sanctions have shut down a new domestic Russian airline, so soon after it launched service, indicates that despite what politicians say, sanctions are having an impact on the Russian economy.

By Jim Hanemaayer

Sources:
The Moscow Times
CNN Money
Dobroflot.com
BBC Business News

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