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Wednesday July 30, 2014 MYT 11:17:29 PM
Wednesday July 30, 2014 MYT 11:19:15 PM
PRAGUE (Reuters) - New European Union and U.S. sanctions against Russia should not hurt the Czech economy, but a protracted trade war could create a new Iron Curtain between the EU and Russia, the Czech government said on Wednesday.
The latest EU sanctions, which were imposed this week and will be reviewed in three months, are part of the strongest international action yet over Russia's support for rebels in eastern Ukraine - support that Moscow denies it is giving.
The Czechs supported the action but oppose more sweeping sanctions, worried about trade relations with Russia, still an important partner for many central European countries.
"It is good (for the Czech Republic) that the sanctions do not have a blanket economic character and aim at a limited number of areas," Prime Minister Bohuslav Sobotka said in a statement, noting that he did not believe further sanctions would be necessary.
"Neither for the European Union, nor for Russia, is it favourable to get into a drawn-out trade war and that some new economic and political Iron Curtain appears on Ukraine's eastern border," the statement quoted him as saying.
Czech exports to Russia last year came to 116.2 billion crowns ($5.67 billion) (3.35 billion pounds) - or 3.7 percent of the total - and imports accounted for 5.5 percent of the total. Only a fraction of the mutual trade involves military material.
The Czech economy is recovering strongly from a record-long recession that ended in 2013. The Finance Ministry forecasts growth to reach 2.7 percent this year.
Jiri Hynek, head of the Czech Defence and Security Industry Association, said the sanctions might lead to an uptick in unemployment in some regions. Retaliatory measures would be a bigger problem, he said.
"The biggest problem for Czech suppliers would be if Russia undertook sanctions and stopped buying even products of a civil nature in the Czech Republic," Hynek told Reuters. "Then the list of affected firms would be much bigger."
(Reporting by Jason Hovet; Editing by Larry king)
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