Global Report

Globalized markets mean tougher Russian sanctions could hurt everyone

What do you do when one of Regina's largest employers is Russian?

Train with Evraz logo on it

Screenshot from an Evraz promotional video about its Western Canadian operations.

The Regina Pats are heading into the Western Hockey League playoffs, but you have to wonder how long their fans will be able to refer to their home ice as Evraz Place. The Russian steelmaker is a big employer in the Saskatchewan capital, and has operations in half a dozen other communities in Western Canada, where it is an important manufacturer of the pipe used in oil and gas pipelines. In December it issued a press release hailing the federal Joint Review Panel’s approval of the contentious Northern Gateway pipeline.

Evraz’s importance to the Western Canadian economy illustrates how tricky it will be for Ottawa and other western governments to escalate economic sanctions against Russia in response to that country’s annexation of Crimea and its role in the Ukraine crisis. For now the sanctions cover only the personal assets of people associated with the crisis. But western politicians have threatened more. Will that include trade and travel restrictions? Penalties for Canadian mining companies continuing to run their Russian operations? A freeze on Evraz’s Canadian profits being repatriated to Russia (made even more complicated by the company’s legal address in London)?

That possibility must be weighing on the minds of investors. The global market for steel can’t be the only reason Evraz’s stock has plunged nearly 50% on the London Stock Exchange since December. At around £60 a share, it’s trading at a shadow of its IPO price of £374 back in 2011.

Stock price chart showing Evraz's performance since its 2011 IPO

The fate of major employers and participants in the Canadian economy is a non-issue when the targets of sanctions are rogue states like Syria, Iran or North Korea. But Russia is one of the BRICs, a member of the G8 and the G20. For all their drawbacks, globalization and liberalized trade have been a force for peace in the modern world; as national economies become more interdependent, they have more to lose by alienating their trading partners, which aren’t necessarily colonies or even allies.

If it comes to that, Russia has the most to lose by flouting international standards. But the consequences for the countries that impose sanctions will be no less damaging in the short term.