Everett likely would feel effects of decline in U.S.-Russian relationship

EVERETT — As diplomats continue to seek a political resolution to the standoff in Ukraine’s Crimean peninsula between Russian and Ukrainian troops, U.S. and European officials are considering economic actions against Russia.

A decline in U.S.-Russian economic relations likely won’t be felt much, if at all, by most companies or workers. However, Everett is likely to feel the effects more than other port or manufacturing cities because of the importance here of shipping and aerospace.

Trade with Russia makes up nearly 10 percent of ships calling at the Port of Everett — about 13 to 18 a year. The port specializes in oversized and heavy cargo, as opposed to container shipping, the bread and butter of Tacoma and Seattle.

A dollar value for goods flowing through the port to or from Russia was not immediately available.

Two shipping companies, SASCO and the Far Eastern Shipping Company, operate between Everett and Russia. The ships usually head to Russia with equipment and products used in oil and gas extraction, mining, transportation, construction and lumber, among other industries.

Tacoma and Seattle would barely notice a drop off in trade with Russia, which makes up a small fraction of the source or destination of goods moving through the state’s major seaports.

Russia’s economy depends on natural resources and commodities, especially energy exports.

For example, Boeing Commercial Airplanes gets about 35 percent of its titanium from Russian producer VSMPO-AVISMA. Since 2009, the two companies have jointly run Ural Boeing Manufacturing, which has more than 150 workers. The aircraft manufacturer also gets some of its aluminum from Russia.

Boeing also has a design center in Moscow and recently announced plans to build a new flight and maintenance training campus in Russia.

Boeing officials declined to comment on potential sanctions.

Since the fall of the Soviet Union in 1991, Boeing has invested about $7.5 billion in Russia, and the company expects to invest about $20 billion more in coming years.

Both Boeing and Airbus expect big growth in demand for commercial airliners from Russia and other former Soviet states in the next 20 years. Boeing puts the demand at about 1,170 new airplanes worth nearly $140 billion.

Airlines in the former Soviet Union operate 477 Boeing aircraft.

Twelve Russian airlines currently operate more than 230 Airbus aircraft and have orders for 80 new jetliners.

How effective would sanctions be?

Russia’s economy is vulnerable, but European leaders haven’t shown much interest in acting. Unilateral action by the U.S. would be fairly ineffective.

“The Russian economy is stagnating at this point,” said Jeffrey Mankoff, deputy director of the Center for Strategic and International Studies’ Russia and Eurasia Program. “Growth last year was less than 1 percent, and it likely will be the same this year.”

The economy there is vulnerable to drops in commodity prices, especially for energy, he said.

“It needs high energy prices to basically stay solvent,” Mankoff said. “Even with oil at more than $100 a barrel, the government isn’t really breaking even.”

European countries make up Russia’s major economic partners and depend heavily on energy supplies. But useful sanctions typically require concerted effort, and many European leaders appear reluctant to act.

“That gives them the most leverage with Russia and the most to lose, too,” Mankoff said.

U.S. trade officials have already canceled a planned visit to Russia to discuss a bilateral trade agreement, and President Barack Obama has called for restrictions on travel to the U.S. by some Russians.

Targeted sanctions could prompt Russian President Vladimir Putin to eventually back off, at least somewhat, said Edwin Truman, a senior fellow at the Peterson Institute for International Economics.

“I am not in a position to judge how effective any sanctions would be in changing President Putin’s mind or over what time period, but history has demonstrated that no country is immune to some impact from such pressures,” Truman said.

Dan Catchpole: 425-339-3454; dcatchpole@heraldnet.com; Twitter: @dcatchpole.

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