Tue March 4, 2014
Deep Ties Between Russia And The West Make Sanctions Risky
Originally published on Tue March 4, 2014 6:31 pm
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The United States is pledging a billion dollars in loan guarantees to Ukraine. It's part of a multinational effort to help stabilize the country's new government. Ukraine was facing deep economic troubles even before the current standoff with Russia. And we're going to spend a few minutes now unpacking the financial aspects of this story. We'll start the question of economic sanctions against Russia. President Obama has warned of possible sanctions if Russia keeps troops in Crimea.
But to have teeth, those sanctions would require the cooperation of European allies. And as NPR's Jim Zarroli reports, that might be hard to come by.
JIM ZARROLI, BYLINE: Russia's economy is heavily dependent on selling commodities such as oil, natural gas, nickel and plutonium, and much of it goes to the West, particularly to Europe.
Robert Kahn, of the Council on Foreign Relations, says that gives the West a certain leverage over Russia.
ROBERT KAHN: But, of course, that leverage is double-edged. We depend on them just as they depend on us.
ZARROLI: Russia may need Europe but Europe also badly needs Russia. And Russia has shown in the past that it's willing to play hardball when it comes to energy. Twice in the 1990s it cut off its gas pipelines to Ukraine, which temporarily affected shipments to Europe. A protracted conflict in Russia would also drive up energy prices.
Robbert van Batenburg, of the brokerage firm Newedge, says as a result Europe doesn't have much of an appetite for taking Russia on right now.
ROBBERT VAN BATENBURG: It primarily stems from their financial and economic vulnerability, and their very strong exposures towards Russia for a lot of the commodities, and particularly, natural gas and oil.
ZARROLI: As a result, European leaders such as Angela Merkel of Germany have been relatively muted in their criticism of Russia. And they've made clear they don't want to punish Russia too harshly.
BATENBURG: For the time being, I suspect that any kind of sanctions will just be more symbolic than anything else.
ZARROLI: But van Batenburg says there is a lot of public anger towards Russia in the world right now, and Western leaders are looking for ways to make their anger known without going too far. One idea that's been floated is to impose limited sanctions on Russia by, say, blocking Russians from getting visas or using Western banks.
Kahn says such measures would cause political headaches for President Putin, especially among the country's oligarchs.
KAHN: They invest in the West. They live in the West. They vacation in the West. And sanctions that really impact them, I think, can have a meaningful effect on Russia domestically in the domestic politics.
ZARROLI: But Stephen Myrow, of Beacon Policy Advisors, says Putin won't necessarily care all that much if a few oligarchs can't get visas.
STEPHEN MYROW: Putin doesn't have that great a relationship with the oligarchs in the first place.
ZARROLI: Myrow was the Treasury Department official when Russia invaded Georgia in 2008. He says Russia is a lot weaker economically than it was back then, and that gives the West an opportunity to affect Russia's behavior. For one thing, he says Europe needs to continue diversifying its energy sources so it's less dependent on Russia long-term.
MYROW: The question is how do you shape the Russian behavior and show them it's not OK to use energy exports as a weapon to try to accomplish your national security goals?
ZARROLI: Myrow says the West also needs to lessen Russia's dominance over Ukraine, by taking steps to shore up its shaky economy. Ukraine may still not be able to prevail against Russia militarily but it will have a better shot at preserving its independence.
Jim Zarroli, NPR News, New York. Transcript provided by NPR, Copyright NPR.