Russian Business Says Sanctions Hurt, Despite Kremlin Optimism

(Bloomberg) -- Russian business isn’t buying the Kremlin’s claims that Western sanctions have helped the economy.

A PwC survey of about 1,000 top executives released Tuesday showed 59 percent said they think the restrictions have hurt the economy. Only 9 percent think Russia will meet President Vladimir Putin’s goal of outpacing the global growth rate by the end of his presidential term in 2024.

“The restrictions caused by sanctions have a long-term impact,” Ruben Vardanyan, a veteran Moscow investment banker, said at a presentation of the report. “Owners can’t sell their businesses, can’t get cheap money, can’t go for an IPO.”

Russia has been hit by waves of U.S. and European Union sanctions since it annexed Crimea from Ukraine in 2014, with limits affecting both individuals and major companies and banks. The government has played down the impact, which Bloomberg Economics estimates could be as much as 6 percent of GDP.

Gloomy Outlook

The survey, which PwC conducted for the first time in early November, included top executives at big state players like Sberbank and Norilsk Nickel, as well as small and medium businesses. It painted a dark picture of the operating environment.

Nearly 90 percent said doing business was difficult, with high taxes, bureaucratic barriers, and the lack of qualified staff listed as the top three reasons. High levels of corruption were cited by 70 percent of respondents.

The chill in relations with the West has had unexpected effects on Russian business, according to Kseniya Ryasova, head of Finn Flair, a major clothing company.

“My friends wanted to expand their business to the U.S. and sell cosmetics, but the bank stupidly didn’t open an account because they thought that they were Russian spies,” she said.

In her own business, costs of imported supplies are rising with the fall in the ruble but consumers’ purchasing power is declining, she said.

There were some bright sides from sanctions, however. Of the 18 percent of respondents who said the restrictions helped their businesses, the bulk were in the farm sector, which has benefited from bans on imported produce the Kremlin imposed in retaliation.

Despite the gloom about the broader impact of sanctions, only 39 percent reported that the restrictions had hurt their businesses, while half said they hadn’t been directly affected.

©2018 Bloomberg L.P.