Buffoon Bluffery; What are Sanctions Really About?

Today, the US imposed more meaningless sanctions on Russia. Of course Russia responded in kind.

In Europe, where far more is to be lost than gained from sanctions, bickering amongst countries suggests no meaningful escalations in sanctions.

Here is a roundup of recent actions, counteractions, threats and counter-threats.

Meaningless Additional US Sanctions

The Financial Times reports US imposes sanctions on 20 more Russians.

The US has announced sanctions on 20 more senior Russian individuals over Moscow’s takeover of Crimea and also singled out a bank which does business with the targeted individuals.

Moscow responded by banning nine American officials from entry to Russia.

Barack Obama, in a statement at the White House, said the US was moving “to impose additional costs” on Moscow by sanctioning more senior Russian officials and “other individuals with substantial resources and influence who provide material support to the Russian leadership.”

He said he had also signed an executive order giving the US the authority to impose sanctions on key sectors of the Russian economy.

Americans banned from Russia include House Speaker John Boehner and senators John McCain and Harry Reid. Michael Steel, Mr Boehner’s spokesman, said: “The speaker is proud to be included on a list of those willing to stand against Putin’s aggression.”

Obama's Bluff Will Be Called

Should Obama actually be dumb enough to impose sanctions on "key sectors of the Russian economy" Russia will respond with punishing sanctions on US interests as well as shutting off natural gas to Europe.

Putin clearly has the upper hand. I suspect European leaders are already relaying this message to Obama "Don't do anything stupid".

Of course, politics being what they are, stupidity happens all the time. And Senator McCain is indeed putting pressure on Obama to do something stupid. Meanwhile ...

US Companies Urge Restraint on Russia Sanctions

Sanction bickering started in Europe immediately. It has now spread to the US. Please consider US Companies Urge Restraint on Russia Sanctions.

US business, which has been quietly lobbying the administration to take a “circumspect approach” to the crisis, has in recent days made clear in meetings with the White House and Congress that it does not want to see an escalation in economic warfare with Moscow. US business groups have been trying to “educate” members of the Obama administration and lawmakers about the potential costs of additional Russian sanctions, even if they cannot mount a full-scale lobbying push because it could be interpreted as hindering Mr Obama’s efforts to put pressure on Moscow.

“You don’t want to sanction the people who buy American products,” said one US business executive in Washington, adding: “That’s targeting American exports, if that’s what it is.”

Myron Brilliant, head of international affairs at the US Chamber of Commerce, noted the importance of acting in concert with US allies, noting the “close co-ordination” with the EU as especially important as well as joint efforts with Switzerland, Turkey, Japan and Canada. But he warned: “A go-it-alone approach by the US could be both economically damaging and ineffective in accomplishing its goals”.

European Tit-for-Tat Bickering Shows Sanctions Hopeless

In Europe, the French want to target Russian money in London while the British want sanctions to start with French defense contracts. The story gets pretty humorous at this point.

The Guardian reports France Warns Russia it Could Cancel Warships Deal.

Buffoon Bluffery

If you read the article, the French foreign minister supports sanctions "only if Britain also acted against Russian oligarchs in London."

Who's foolin' who with this kind of buffoon bluffery? Putin has a chance to respond "OK we cancel the deal. We don't want or need your stinkin' warships."

Indeed, Russia does not need warships. They are of zero practical use. Economically speaking, Putin should take this opportunity to cancel the deal.

Hollande would look like a fool, which of course he is.

Russia Halts Ukraine Imports

With the US engaged in meaningless sanctions, and France engaged in buffoon bluffs, Russia Puts Economic Squeeze on Ukraine.

Russia has started disrupting imports from Ukraine, raising fears that the two countries’ stand-off over Crimea is spilling over into a fresh trade war.

Citing complaints from export-oriented businesses, Ukrainian agriculture consultancy APK-Inform reported that Russian customs officials had refused entry of all Ukrainian goods without explanation late on Wednesday.

“More than 200 cargo trucks are piled up at Bachivsk, one of the main border crossings for Ukrainian goods going into Russia,” said Serhiy Astakhov, a spokesperson at Ukraine’s state border guard service. He was not immediately able to comment on possible bottlenecks at other roadway border crossings.

Russia’s food hygiene regulator has repeatedly warned of food imports from Ukraine over the past month, saying it had found a meat shipment with fake veterinary documentation, warning of risks of contaminated pork and claiming doubts as to whether its Ukrainian counterpart could do its job properly against the background of the recent political changes in Kiev.

Russia has repeatedly used non-tariff trade barriers to block imports from countries ranging from China to Norway, and extensively used such instruments to pressure Ukraine when Kiev was planning to sign an association agreement with the EU last year.

A Ukrainian government spokesperson said on Thursday the transport bottlenecks at the border looked “like a trade war”.

What are Sanctions Really About?

Q: Are any of the sanctions doing anything to help Ukraine?
A: Obviously not

Q: Are the bluffs by Obama, Hollande, and others easily seen?
A: Remarkably easy

Q: Do further sanctions or trade wars make any sense?
A: Of course not. For further discussion, please see Negative Sum Game; Winners and Losers

Q: So, if sanctions are to the detriment of Ukraine, the US, and all of Europe, then what the hell are the sanctions really about?
A: Egos!

Obama has to preserve his precious ego. So does McCain, Boehner, Hollande, and everyone else promoting economic insanity. McCain in particular is prepared to destroy Europe economically to get his way.

Ultimately, and with thanks to pressure from Merkel and US business leaders, I expect common sense to prevail.

Yet, when dealing with fragile egos, one never knows how insane things can get. Nearly any outcome is conceivable.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com