Russia Has Upper Hand in Ukraine, No Meaningful Sanctions Coming

Will there be any meaningful sanctions against Russia for invading Crimea? The answer is no, and a comparison to Iran will show why.

It was easy enough to impose sanctions on Iran because there was no meaningful trade with Iran other than oil. And global oil supply can come from anywhere.

Secondly, and unlike the US which has little trade with Russia, Germany, the UK, and other European countries do have meaningful trade with Russia.

Finally, Germany gets 30% of its natural gas supply from Russia. Impose severe sanctions and Russia can shut down those supply lines, most of which happen to run through Ukraine.

Obama can pretend to put down a tough stance, but don't expect any meaningful reaction globally. Events are already firming up along those lines.

UK Says No to Sanctions

Two days ago the Guardian reported secret documents photographed outside No 10 Downing Street [the Prime Minister's Office] state that 'London's financial centre' should not be closed to Russians.

The picture of the document was taken by the freelance photographer Steve Back, who specialises in spotting secret documents carried openly by officials entering Downing Street. The document was in the hands of an unnamed official attending a meeting of the national security council (NSC) called by the prime minister to discuss the Ukrainian crisis.

The document said Britain should:

• "Not support, for now, trade sanctions … or close London's financial centre to Russians."

• Be prepared to join other EU countries in imposing "visa restrictions/travel bans" on Russian officials.

Former US presidential candidate Senator John McCain said he was "disappointed" by the UK's position and said European countries were "ignoring the lessons of history".

Asked if it was right to avoid such sanctions, he said: "Of course not. I am not astonished, to be very frank with you. Disappointed, but not astonished."

McCain Wants Missiles in Czech Republic

I am disappointed but hardly astonished that McCain's solution is to put missiles in the Czech Republic.

Splits Emerge in West’s Stance on Russia

Today, the Financial Times reported Splits Emerge in West’s Stance on Russia.

The west’s diplomatic efforts to counter Russia’s takeover of Crimea faced setbacks on multiple fronts on Wednesday as the Kremlin refused to engage with the new Ukrainian government and allies themselves were at loggerheads over how tough a line to take with Moscow.

The refusal of Sergei Lavrov, the Russian foreign minister, to meet his Ukrainian counterpart cast a shadow over talks in Paris, the US and Russia’s first top-level meeting since the crisis intensified last week.

At the same time, a US-led push for allied agreement to impose sanctions on Russia also faltered with the strong resistance of Germany, which was prepared only to cut off visa liberalisation and trade agreement talks with Russia.

Natural Gas and More

“They’re afraid if we do something the Russians will hit back,” said a senior EU official involved in summit planning.

You bet. The fear goes beyond natural gas.

Andrei Klishas, a Russian senator, said he was preparing countermeasures which could come into effect if sanctions were imposed on Russia.

The proposed legislation “would allow us to freeze the assets of European and American companies – including private ones – working in our country,” he told the pro-Kremlin newspaper Izvestia.

There would be serious repercussions to McCain's idea of sanctions coupled with placing US missiles in the Czech Republic. And how would McCain pay for those missiles? He does not say.

Either McCain cannot think clearly, or worse yet he can and would welcome another global war.

Culture of Engagement

Also consider Ukraine crisis tests Berlin’s new ‘culture of engagement’.

German chancellor Angela Merkel on Thursday faces the first test of a new foreign policy sketched out by her ministers in recent weeks; a “culture of engagement” intended to replace Germany’s postwar “culture of restraint”.

But while Berlin has played a more active role in the west’s response to Ukraine, the debate over how to react to Russia’s troop deployment there has illustrated the limits of Germany’s new assertiveness.

With deep commercial ties to Russia, Germany has been a leading voice against sanctions. There is no backing in Berlin for measures that go beyond the suspension of talks on a Russia-EU trade agreement and visa liberalisation.

Germany is also arguing that any western aid to Kiev should come with tough economic conditions, supervised by the International Monetary Fund. It has opposed Polish efforts to accelerate the signing of the EU-Ukraine free trade agreement, partly out of fear of further irritating Vladimir Putin, Russian president.

German business leaders point out the US has far less to lose from sanctions – American companies account for 3.8 per cent of Russian imports, compared with a share of nearly 10 per cent for German business.

Germany is deeply dependent on Gazprom for its energy needs. It is the single largest buyer of Russian natural gas. More than a third of Germany’s gas imports came from Russia in 2012, according to government data.

Sympathy for Russia is widespread. Even conservative and habitually pro-American newspapers such as Die Welt have carried editorials warning against “demonising” Moscow. “The west should hug Putin,” was the headline.

Meaningful sanctions? Forget about them.

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