generalspeaking

No Gain Without Pain

"So this is a real crackdown on Russian society, forcing people to step in line with Putin's policies. His ultimate goal, of course, is to overthrow the Kyiv government and replace it with one happy with Russian influence."
Robert Orttung, assistant director, George Washington University's European, Russian and Eurasian Studies

"With these actions they have basically undermined their position internationally, saying, 'Whatever agreements we may sign with you are worthless.' Businesses willing to work in Russia better have a very high tolerance for risk."
Cory Welt, Russian specialist, George Washington University

Dmitry Serebryakova/AFP/Getty Images  Pro-Kremlin activists rally at Red Square in Moscow on Tuesday to celebrate the incorporation of Crimea.

It's amazing how swiftly world events are capable of producing huge changes in geographic realities at a time when most of the civilized world was under the impression geo-politics had gone well beyond shifting borders falling prey to state territorial ambitions of ruthless dictators. But there you have it, Russia's Vladimir Putin has proven his credentials as Russia's new imperialist strongman, if there was ever any doubt in the last several years.

Bread and circuses, war and peace, all courtesy of President no-nonsense. Russia tasted economic freedom to swagger, thanks to its huge energy resources and energy-hungry Europe's willingness to place itself in energy-thrall to its volatile relations with the growling bear. And circuses were enabled by the huge profits reaped through energy provision when Sochi was chosen by the Olympic Committee to host it, entertaining the world prepared to look aside at the clampdown on journalists, gays and political opponents.

And then the theatre of a war composed of the threat of action that was withheld, with not a shot needing to be fired, nor dead Ukrainian patriots scattered about; a simple staged referendum following on an intensely hostile propaganda war that led to that success, and peace was established when Ukraine was forced to forfeit a part of its territory that the Kremlin saw as "integral" to Russia's heritage, past and future.

Intimidation of a burly beast that has been well armed and confident of success is quite influential in persuading the less well-armed and conflict-aversion-inclined to subside their ambitions to retain what is theirs and surrender it to those who would have it regardless. Resulting in a backlash of condemnation that only serves to enrage the victorious, sneering at the imposition of sanctions as meaningless and futile.

America exports about $11-billion to Russia, Canada $1.65-billion; sanctions will not destroy those economies, nor much harm Russia's, but for the insult they represent. And then there's Europe, with the EU Russia's largest trading partner, purchasing about 50% of total Russian exports. Russia sold 213-billion euros of goods to the EU. A decline in that traffic could potentially cripple a Russian economy already straitened by recent events.

Europe relies on Russia for about a third of its energy; some eastern European countries that are part of the EU are 100%-dependent on Russia for their energy, others, like Germany only 40%, but still significantly so. Russian exports to the EU topped $123-billion in 2013. "So it is much easier for the U.S. to demand economic sanctions because it has little pain", said Orttung.

French arms companies run a brisk business with Russia; the French delivered a warship earlier this month to Russia as part of a $1.6-billion deal. Germany accounts for 31% of all European exports to Russia. Britain's financial centre slavers over the investment wealth of Russian oligarchs. Chancellor Angela Merkel has stated she wants sanctions to cause "massive economic and political harm" to Russia.

Her wishes will certainly not be reflected by German business. Ukraine, Poland, the Baltic States, Georgia and Moldova seem forever threatened by Russia's pathology of aggression and acquisitiveness. Russian oligarchs have luxuriated in the security and benefits to be found in liberal western democracies and their safe financial systems, their English country estates.

Russia's economy is less robust now than it was, with a growth rate of not even one percent. Its top ten billionaires have lost a combined $6.6-billion in the week just past. "You don't need to have sanctions in place to cause economic turmoil", said Christopher Granville, managing director of Trusted Sources, a market research firm.

"The expectation is enough." Capital flight from Russia could be $130-billion, this year. How will President Putin respond to the Russian population's resentment at their change in fortunes then?

Labels: Canada, Conflict, Crimea, Economy, EU, Russia, Sanctions, Ukraine, US

posted by Pieface @ Thursday, March 20, 2014