Biden, EU announce ban on luxury goods exports to Russia

The US will revoke normal trade relations with Russia as the invasion of Ukraine reaches its nineteenth day. An executive order announced by President Joe Biden on Friday includes a ban that will prevent US citizens, businesses, and other entities from exporting, re-exporting, or supplying in any way luxury goods such as clothing, watches, and cars from the US to Russia. The move is expected to be accompanied by similar actions from the European Union and the other members of the Group of Seven (G7), the world's wealthiest liberal democracies that are Canada, France, Japan, Italy, Germany, and the UK.

“Each of our nations is going to take steps to deny most-favored-nation status to Russia,” Biden said from the White House. “A most-favored-nation status designation means two countries have agreed to trade with each other under the best possible terms: Low tariffs, few barriers to trade, and the highest possible imports allowed. In the United States, we call this permanent normal trade relations—PNTR—but it’s the same thing,” the President explained.

Most-favored-nation (MFN) status has ensured that countries within the World Trade Organization are trading on equal terms with each partner. In an example offered by the Associated Press, if “the United States levies a thirteen percent tariff on imported leather gloves—MFN status means that gloves imported from France, China, Brazil, and Russia would all be taxed at that same rate.” Officially stripping Russia of this status will require a vote by Congress, which is expected this week. This will demote Russia to the same trade status as North Korea and Cuba, countries the US also excludes from PNTR.

The executive order also prohibits imports from Russia of products like alcoholic beverages, seafood, and non-industrial diamonds, which are the rough, natural diamonds mined and distributed by Russian state-owned companies like Alrosa. The diamond import ban is expected to hurt more than previous US sanctions levied against Alrosa a few days into the conflict, which restricted debt and equity transactions and froze the US-held assets of its oligarch CEO and banned his travel into the country.

Russia losing favored trade relations with the EU will be more devastating

Since Biden had already announced a ban of US imports of Russian gas, oil, and coal earlier in the week, this new trade relations announcement is considered largely symbolic as the value of the products covered by the export restrictions is only about 550 million dollars per year and product bans outside of energy imports will only cost Russia about one billion dollars per year, according to a White House fact sheet.

But the European Union is Russia’s largest trading partner and so trade restrictions in conjunction with the US will have a very large impact. EU imports from Russia in 2020 equaled 100 billion US dollars according to the United Nations Comtrade database on international trade. European Commission President Ursula von der Leyen announced also on Friday the revocation of Russia’s MFN status in EU markets as well as a ban on exports of any EU luxury goods to Russia.

The New York Times reports that EU ambassadors will meet on Monday to finalize the luxury goods sanctions that are expected to impact France and Italy the hardest as the Russian consumer loves their iconic designer brands.