Sanctions won’t save Ukraine

The Western countries continue to punish Moscow with sanctions for what is happening in Ukraine. Meanwhile experts warn that the restrictions may hit their initiators more than they hit Russia.

The Western countries continue to punish Moscow with sanctions for what is happening in Ukraine. Meanwhile experts warn that the restrictions may hit their initiators more than they hit Russia.

In late July 2014 Europe and the United States imposed fresh sanctions against Moscow. Apart from the now traditional addition of more names of Russian physical persons and companies to the black list, Brussels imposed some restrictions on the Russian economy. The European Union banned the export to Russia of oil industry equipment, dual-purpose electronics and forbidden the signing of any new arms deals. Russian state banks have been blocked from European financial markets. The President of the European Council Herman Van Rompuy, said that the EU sanctions send “a powerful signal to the leaders of the Russian Federation: destabilizing Ukraine or any other Eastern European neighbour states will bring heavy costs to its economy”. The restrictive measures will be in force for a year.

Next to the European Union, Washington announced new sanctions against Russia on 30 July. The black list includes the United Ship-Building Corporation, Rosselkhozbank, VTB and the Bank of Moscow. US citizens or persons living in the USA are forbidden to finance or strike any other new credit deals with these banks for a term of more than 90 days.

According to Barack Obama, the West was reluctant to impose sanctions. “It didn’t have to come to this. It doesn’t have to be this way. This is a choice that Russia, and President Putin in particular, has made”. In the West generally the current sanctions are seen as a symbol of disenchantment with Moscow. “We went out of our way to integrate Russia… We included Russia in the WTO…We hoped that Russia was serous about interacting with the EU,” says the Polish Foreign Minister Radoslaw Sikorski. Now, by introducing sanctions, the USA and Europe admit the failure of 25 years of attempts to build a relationship on the basis of the rules of conduct of post-Soviet Russia put forward by the West.

The tactical aim of the restrictions is to bring massive pressure on Vladimir Putin and his entourage to change stance over Ukraine in particular and the Russian foreign policy in general. The strategic goal is to punish Moscow for the ”Crimean precedent,” the violation of international law that led to the annexation of part of another state’s territory, a move Washington disapproves. The fear in the US is that if the action is left without a response other countries, notably Iran and China, would act in a similar way (1, 2).

However, some political scientists warn: by opting for sanctions the Western countries would not only damage their own economic and strategic interests in the world, but would compound the Ukrainian crisis. They call on the United States to pursue a balanced policy, to carefully calculate the consequences of their actions, to renounce “moral clarity” (the term used by the American conservatives who idealised US policy and saw the world in black-and-white) and to make trade-offs.

Everyone will suffer

The economic sanctions imposed by Europe would hit not only the Russian, but also the European economy. The EU is already counting the losses due to the possible loss of part of the Russian market.

Mark Kanarsky
Infographics. European Union - Russia's key
tranding partner.

European officials agree that the sanctions would cut both ways, but say the EU countries should tighten their belts and punish Russia. British politicians are particularly vocal on this matter. However, The Telegraph in a wry comment notes that it is easier for London to make such a call on Europe because it accounts for a mere 2,5% of Russian imports. The main sufferers from the sanctions will be the continental countries, notably Germany, which accounted for nearly а third of EU exports to Russia and for more than 13 billion euros of private investments in the Russian economy in 2013.

Officially, Berlin ranged itself with the position of the British Foreign Office: the German Finance Minister Wolfgang Schaeuble has said that “Germany’s economic interests take the back seat on the issue of sanctions against Moscow.” In his opinion, it is more important to maintain peace and stability. German industrialists, however, are of a different opinion. “The consequences of the Ukraine crisis have affected the performance of East German factories,” said the head of the Eastern division of the German Engineering Association (VDMA) Reinhardt Petz. “We see how many years of partnership and hard-won trust between the parties are crumbling.” On the whole, according to the VDMA, German exports to Russia dropped by 17,2% in the first quarter due to geopolitical tensions, and according to the German economy’s Eastern Committee, about 25,000 jobs are under threat. In addition to Germany, Italy, France and the Netherlands depend heavily on trade with Russia. “It is hard for us to tell what sanctions would be introduced and what their effect would be,” said Renault Vice-President for Sales and Marketing Jerome Stoll summing up the mood among European businessmen.

In addition to the direct damage from the sanctions, the situation for the European economies is compounded by Moscow’s retaliatory sanctions. Thus, Russia has used errors in certification and the presence of pests to close its market to vegetables and fruits from Poland regarded as one of the main vehicles of EU’s anti-Russian policy in Ukraine. As a result, according to the country’s vice premier Janusz Piechocinski, Poland will lose 0.6% of its GDP before the end of 2014. And the head of Rossselkhoznadzor Sergey Dankvert did not rule out an embargo on the import of vegetables from EU countries. Brussels will not be able to file a complaint with the WTO because the WTO does not handle issues connected with phyto-sanitary norms.

On the whole Moscow believes, that because the US-led campaign to punish Russia mainly hurts European economic interests it may lead to frictions in Trans-Atlantic relations and among the EU members themselves. Such frictions may arise above all between the anti-Russian presidents and prime ministers in Eastern Europe, on the one hand, and the West European leaders who benefit from trade with Russia, on the other.

The only country that stands to gain is China

Strategically, the sanctions policy is going to weaken the position of those who impose sanctions. Unlike in the economic field, the United States will be the hardest hit.

As a result of sanctions Russia may refuse to cooperate with the USA in some areas that are vital for Americans. In particular, on the transit of American cargoes to Afghanistan, on the North Korean issue, Syria and Iran. But the biggest problem for the US may be the consequences of a break with Russia in the Far East.

In a bid to slow down the growing Chinese might, Washington seeks to build a collective security system in East Asia that would guarantee the territorial integrity of states and moderate Beijing’s aggressiveness in pushing its territorial claims to many of its neighbours in the region. That system cannot be effective without Russian support. Moreover, the recent development of Sino-Russian relations (for example, a $400 billion 30 year gas contract was signed in May) shows that Russia, previously a potential balancer of the regional security system, is becoming an ally of China. It guarantees to Beijing supply of resources without transit risks and ensures stability in Central Asia thus giving China a free hand in Eastern Asia. “By punishing Russia which poses no strategic threat to us, we actually help the Chinese who are our main strategic rival,” sums up Thomas Graham. It is not by chance that America’s allies in the Far East, who fear China, have taken a very pragmatic stand on punishing Russia in spite of pressure from Washington. Thus, Japan is refusing to introduce sectoral restrictions, and South Korea is not planning any sanctions against Russia.

Perhaps it would have made sense if the United States, through sanctions, could undo “the Crimean precedent.” However, the situation is already irreversible, symbolizing a new system of international relations. In the opinion of Eric Posner, a Law Professor with Chicago University, it looks increasingly like the system that existed in the 19th century when a small group of great powers considered only one another as equals. Small states meanwhile had to survive by establishing client relations with one or several great powers.

The main rule in this system, Eric Posner reminds us, is to prevent the rivalry for clients from erupting into a full-scale war. America is effectively breaking that rule over the Ukrainian issue: the US simply denies Russia’s great power status and continues to see it as the losing side in the Cold War. Washington’s discriminatory policy may turn Moscow from a potential partner into a leader of a group of hostile states and a kind of role model. For these countries follow the stand-off between Russia and the USA with interest and try to understand, looking at Russia’s example, the limits of what they can do in the new world system and what the punishment could be if they crossed these limits.

It won’t help Ukraine

International Alexei Druzhinin/ RIA Novosti/ AP
The signing of gas agreement with China

 

Obviously, the anti-Russian sanctions policy will not force Putin to take a pro-Western stand on Ukraine. On the contrary, sanctions may cause Russia to toughen its position with regard to Kiev.

The Western countries assure us that the sanctions would be lifted the moment Moscow stopped destabilizing Ukraine. However, Moscow insists that its position is totally constructive, that it has always come out for the preservation of Ukraine’s territorial integrity (less Crimea) and for the solution of the Donbass problem through negotiations. However, Russia’s attempt to launch a negotiating process “met with resistance of the new Ukrainian leadership which was and is aware of practically unquestioning support of our American colleagues,” the Russian Foreign Minister Sergey Lavrov explained. Because President Petro Poroshenko is a hostage to the radicalized public opinion in Ukraine and does not hold the full power, he cannot afford to agree with any other outcome of the civil war except total defeat of the Donetsk and Luhansk People’s Republics. That is why the next round of consultations held in Minsk at the end of July 2014 yielded no results.

Moscow for its part cannot countenance a defeat of these self-proclaimed republics, therefore sanctions “would merely cause Russia to change its tactics, but would not force Putin to give up defending what he considers to be Russian national interests”, Thomas Graham believes. Moscow considers the preservation of the Russian-speaking environment and the defence of the rights of Russians in south-eastern Ukraine to be the main instrument of influencing the policy of the key post-Soviet state and a buffer zone between Russia and the West. Therefore the Kremlin cannot but react to the situation when “an armed uprising in Kiev brought to power a coalition of ultra-nationalists and pro-Western politicians, the worst possible combination for Russia. President Putin has assessed it as a foreign policy challenge and as a threat to stability in the country”.

Indeed, sanctions may cause Putin to take a tougher stand on Ukraine. His fairly moderate position with regard to Kiev and what many believe to be insufficient support of the DPR and LPR have come in for angry criticism from bloggers and social activists. According to VTsIOM, a pollster, the number of those who support the independence of the DPR and LPR doubled over the past several months. The Russian President is under pressure either to supply the DPR and LPR with significant amounts of heavy weaponry or to introduce a peace-keeping contingent into Ukraine. Western sanctions do not only put Putin in a crossfire but, in the opinion of Western experts, strengthen the positions of Russian nationalists, especially in the armed forces and security services. Faced with these challenges, the President may abandon his current moderate position.

Compounding the situation is the fact that Putin cannot afford to yield to pressure over Ukraine because that would create a dangerous precedent. Russia views sanctions as a response not so much to its actions in Ukraine as to Russian diplomacy in general, i.e., as a punishment for its recently independent policy that irks Washington. Because concessions to Ukraine would not strike sanctions off the agenda, the USA and Europe may blackmail Russia with the same sanctions over any other issue where their policy diverges from that of Russia.

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Thus, the policy of sanctions against Russia is unconstructive, not optimum and even harmful in terms of stabilising the situation in Eastern Europe and the West’s global interests. As some Western media write, such measures as raising the cost of energy for Europe or banning Russian companies from the European credit market would not bring peace to Ukraine.

Europe has a chance to give up this approach because the sanctions may be revised three months after they were imposed (there are ample grounds for such a revision, beginning from the investigation into the downing of a Malaysian Boeing, which is likely to confirm Ukraine’s guilt). The new European Commission under the pragmatic Jean-Claude Junker may do just that. Junker’s key task will be reform to centralilse the EU, while deepening of the conflict with Moscow (a divisive issue within the EU) is not on his agenda, especially on behalf of a state that has proved to be a bankrupt in the economic, political, ideological and military fields. Even if the EU wins the battle for Ukraine, it would get on its doorstep a failed state with a radicalized population, devastated economy and huge financial demands that Brussels would be unable to meet.

It would be harder for the United States to adopt a rational policy if only because mid-term elections for Congress are due to be held in late 2014. If Barack Obama softens pressure on Russia, the Republicans may take advantage of this: they would accuse him of showing weakness once again, of pursuing a policy of “appeasement” and thus get extra American votes. Besides, for the US to change its policy with regard to Russia would mean stepping over a psychological barrier in recognizing Russia as a great power with its own sphere of influence, interests, and position in world politics that would have to be respected.