The Politics of Counter-Sanctions: The Domestic Drivers and Constraints of Russian-EU Trade Relations

EU and US sanctions against Russia over its actions in Ukraine, and Russia’s countersanctions, are now a subject of intense interest due to their political importance and potential economic ramifications. Much has already been written on Russia’s use of punitive trade policy in pursuit of the Putin government’s foreign policy objectives. Significantly less attention, however, has been paid to the domestic politics which shape the substantive content of Russia’s retaliatory measures – i.e. the choice of goods to be embargoed (or not). This study investigates the intense lobbying efforts by well-organized interest groups that preceded the government’s publication of the list of banned imports on August 7, 2014. By focusing on the dynamics of conflict between lobbyists representing the agricultural sector and domestic manufacturers, and those advocating the interests of Russia’s retail chains and wine importers, the paper seeks to better elucidate the domestic drivers and constraints of trade retaliation policies. The strategic interaction between national leaders and organized interest groups helps explain why some imports from the EU were comprehensively banned (e.g. pork, dairy) while others were exempted (e.g. wine, canned fish). The study also analyses the Russian government’s strategy for buying off or compensating the “loser” industries, including through promises of transport subsidies and financing from state banks. By shedding light on the domestic determinants of countersanctions, the analysis contributes to the literature on the political economy of trade wars, as well as current debates about the future of EU-Russian economic relations.