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Walker's World: Sanctions and Putin

By MARTIN WALKER, UPI Editor Emeritus   |   March 17, 2014 at 1:35 AM
WASHINGTON, March 17 (UPI) -- We are about to see whether the successful use of sanctions against Iran can be repeated, and whether they will have sufficient impact to make the Russia of Vladimir Putin draw back from the Ukraine crisis.

Europe and the United States are expected to announce Monday the form of sanctions they intend to apply if Russia goes ahead with the annexation of Crimea after the Sunday referendum in the Black Sea peninsula, which has been part of Ukraine since 1954.

As reports came through of Russian troops massing on Ukraine's border, German Chancellor Angela Merkel last week told the Bundestag, Germany's Parliament, any decision by the Kremlin to change borders by force would meet a very robust response.

"We would not only see it, also as neighbors of Russia, as a threat. And it would not only change the European Union's relationship with Russia," she told Parliament. "No, this would also cause massive damage to Russia, economically and politically."

European foreign ministers meet Monday to agree on what sanctions to apply. French Foreign Minister Laurent Fabius said these could include freezing the assets of individual Russians or Ukrainians, as well as sanctions relating to travel visas. European sources say a list has been prepared of as many as 130 high-level Russians, including the defense minister and the CEOs of the country's largest energy companies. The list is believed to include the CEO of the natural gas monopoly Gazprom and the head of Rosneft, Russia's largest oil company.

Such sanctions would be "stupid, petty, and obvious sabotage of themselves," Mikhail Leontyev, a spokesman for Rosneft, said Friday. Striking out at Russian energy giants would "primarily affect ... business partners in the West," he said.

This would be just the beginning. The sanctions start with targeted individuals and can then escalate into asset seizures, the banning of banking cooperation or of trade and other measures. At the extreme, sanctions could be able to cripple a target economy almost as much as the impact of a real war. This is what was visibly happening to Iraq under Saddam Hussein, and began to happen to Iran where inflation reached 40 percent.

If the sanctions succeed, then the international community of wealthy democratic nations will be seen to wield a potent new and non-violent weapon to impose their standards for international behavior.

If sanctions fail, and the odds are probably stacked in Russia's favor, then the choice becomes simple for the West. If sanctions fail, the only remaining tools to force other nations to comply will be military means, the fomenting of revolution and astute diplomacy.

The stakes, therefore, are high.

We have already seen some of costs being inflicted. The Russian stock market has already lost more than the $60 billion Russia spent on the Sochi Olympics. But the impact is hard to predict. Former Russian Finance Minister Alexei Kudrin thinks capital flight from Russia could soar from $60 billion last year to $200 billion this year. But that could go into reverse if Russian billionaires start bringing their money home for fear their foreign assets would be frozen.

The lesson of Iran, and possibly of Iraq before that, is that economic and trade sanctions can have very severe impacts on target countries. Iran and Iraq, like Russia, are countries that depend heavily on the export of oil and gas. But Russia is a far larger country and economy than either of the two others. German industrialists claim 300,000 German jobs depend on exports to Russia. EU-Russian trade makes up 15 percent of Russia's economy and just 1 percent of Europe's. Although EU countries depend on Russia for about a third of their gas, storage tanks are full after a relatively mild winter.

Russia depends on energy exports, taxes for which provide half the state budget. Traditionally Europe has bought about 70 percent of Russia's energy exports, but there are alternative markets in China and Japan, although many fewer pipelines to deliver the oil and gas.

Russian Foreign Minister Sergei Lavrov warned in London Friday sanctions would be "counterproductive ... and will not facilitate mutual interests."

One question Lavrov could have put is whether Europe can cope if Russian counters by cutting off energy exports. It would hurt the Russian economy but could hurt Europe far more and defeat the policy. Freezing voters would be unlikely to support governments determined to continue with sanctions.

Above all, Russia is a great power with a relatively advanced military with nuclear weapons. It may be significant that Russia also has a nuclear doctrine that accepts the use in certain circumstances of tactical nuclear weapons, just as NATO did in the Cold War when tactical nuclear weapons were seen as a counter to Soviet superiority in conventional forces. Rather than face defeat by sanctions over a major issue of national security, Russia may decide to respond violently.

That is the real weakness of sanctions against a great power. If the stakes are high enough, and over Ukraine they could be, a country like Russia is unlikely to let itself be deterred by sanctions alone. Sanctions are the chosen weapons of countries (like the West) that prefer to avoid war, and we should never forget that Vladimir Putin is a carnivore in a world of vegetarians.

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