generalspeaking

Economic Response to Russian Threats

"There will be far-reaching change in our relations with Russia -- possibly including a broad palette of economic measures -- if Russia takes further destabilizing measures in Crimea in addition to those already undertaken, or takes military action."
"I hope it doesn't get to that point."
German Chancellor Angela Merkel

"Growth in Russia has slowed up quite a lot. It's about 1.3% right now and it's also a time when the rest of the world is picking up. If sanctions are slapped on, then the economy could go into recession."
"The other way [Russia] could retaliate, which is questionable, would be turning off the gas. Turning off gas supplies wouldn't necessarily be doing them a favour. The risk of that is that in time Europe would regard Russia as an unreliable supplier and in time would actually think about finding other supplies of gas."
Paul Rawkins, senior director, Fitch Ratings (global debt rating agency)

"There should be a greater degree of stringency of Russian companies interacting with western companies. Companies that have opaque accounting practices or opaque operating practices, we should be guarding against these."
"[It] is a form of sanctions in a sophisticated way. It has the benefit of being the right thing to do, not just as a response to this particular crisis."
"You don't have to argue it from a saintly point of view. You can argue that if we don't do this the next time [the problem] will be bigger and bigger. It's good policy and moral policy."
"In a game of chicken, if you like, the West will win because Russia will be forced to fold before us. Economically, he's in a lot of trouble. It makes him very vulnerable indeed."

James Nixey, head, Russia and Eurasia program, Chatham House, British think tank

Well, isn't that a turn-about. Russia, one of the five permanent United Nations Security Council members alongside China, the United States, Britain and France, one of the two permanent members that always balks at imposing sanctions against any country because the Russian Federation, like China, doesn't subscribe to such means to convince sovereign countries of their misdeeds and the need to conform to human rights codes, is itself now on the other side of the divide.

Russian oligarchs have been busy sending their billions out of the country and to presumed safety. That kind of capital flight has taken wings, with about $15.5-billion leaving of late, and another $4.2-billion judged to have left in January. Russia's spectacular reversion to the growling bear of the Soviet years has spooked its wealthy; since the Russian invasion-that-never-was of Ukraine, panic is growing in financial quarters.

World leaders seem now to look back on the Russian annexation of South Ossetia and Abkhazia in 2008, prying them away from Georgia, and sending troops to meet the Georgian military, an ugly post Cold War reversal that world powers hoped would not be repeated, and preferred to condemn but also to overlook. It was obviously, not a one-off attempt to strong-arm a former Soviet satellite back into the fold, or suffer the consequences.

And, at this juncture, with the current explosion of activity in Ukraine, with the fate of Sevastopol and Russia's Black Sea fleet comfortably ensconced in what now is effectively Russian territory, the fears are that Crimea in total will defect to Russia. Given the vote in a week's time and judging by the fever to secede by what appears to be the majority of Crimeans, it seems a foregone conclusion.

Which, it can be debated, would satisfy Russia sufficiently to leave the rest to Ukraine for who wants to pick up that enormous debt? And leaving Ukraine certainly humbled by the experience of opposing Russian hegemonic plans.

Russia, economists now believe, is in a fragile financial situation. While remaining the world's largest exporter of natural gas, a new competitor is looming on the horizon. Shale gas and oil extraction in the U.S. is leading that country to consider becoming a major exporter of both to energy-hungry world markets, and where else would the United States focus on selling but to its democratic partners in Europe? Many of whom have begun weaning themselves off Russian gas coming through Ukraine.

The volatile nature of dealing with the Kremlin and specifically the prickly Vladimir Putin, enraged over the EU's, NATO's and the United States' incursion into Eastern Europe as though deliberately intending to give the Russian Federation both black eyes and bloody nose for its intemperance and future designs for its Eurasian economic plans, has put the EU states dependent on Russian energy on edge far too often for comfort. Using energy as a tool for aggression doesn't sit well.

And when it's done repeatedly and as transparently has has occurred the past years during the vulnerable winter months, the backlash was likely inevitable. A former U.S. ambassador to Ukraine, Carlos Pascual now leads the State Department's Bureau of Energy Resources and he states that though the American exports would not be immediate to solve Europe's problems:

"It sends a clear signal that the global gas market is changing, that there is the prospect of much greater supply coming from other parts of the world. This is a radically changed market. Our challenge is to look at U.S. production in the global context and understand how we can influence what happens."

Labels: Conflict, Crimea, Economy, EU, Intervention, Russia, U.S., Ukraine

posted by Pieface @ Monday, March 10, 2014