Opinion

The Great Debate

from Anatole Kaletsky:

Why the Russian sanctions don’t work

putin!!

Why did the U.S. and European sanctions against Russia earlier this week trigger a rebound in the ruble and the Moscow stock market?

To understand this paradox it is worth recalling Yes Minister, the British TV comedy about a blundering politician who stumbles from crisis to crisis with the same justification for every panic response: “Something must be done. This is something --– therefore it must be done.”

The problem with this syllogism is that doing something may be worse than doing nothing -- and the Western decision to rely on economic sanctions in the Ukraine crisis is a case in point.

russian foreign ministerThe obvious objection is that economic gestures from the United States and Europe have proved pathetically ineffectual in deterring Russia and only emphasizes the West’s lack of conviction and planning. Russian President Vladimir Putin, meanwhile, has achieved what were probably his main goals: gaining tacit international recognition for the annexation of Crimea, as an irreversible fait accompli; and extracting an admission from Ukrainian President Oleksandr Turchynov that Kiev is “helpless” to prevent the country’s disintegration as long as Russia remains hostile.

In addition to conceding these huge gains to Putin and undermining U.S. credibility as a global policeman in the Middle East and Asia, economic sanctions could prove disastrous for several more subtle reasons.

Don’t cry for the Nabucco pipeline

The site of a newly opened distribution hub of the gas pipeline Gazelle is pictured in Primda

It is too late for regrets. With Europe worried that Moscow could cut off gas deliveries to Ukraine, which would trigger price volatility and supply risks throughout the continent, the failure of the Nabucco pipeline project stands out.

Created to carry Caspian gas into Europe by bypassing Ukraine, Nabucco would have given Europeans and Americans a much-needed sense of supply security — though the pipeline would have carried its capacity of 31 billion cubic meters of gas annually only near the end of this decade. Instead, Europeans are left scratching their heads and searching for alternative energy supplies.

Russia, meanwhile, is likely to remain Europe’s chief natural gas supplier through at least 2020, despite the anticipated growth of diversified gas shipments to Europe, including liquefied natural gas (LNG) from the vast U.S. shale-gas resources.

U.S. v Russia: Searching for Kennan

No matter how counterintuitive it may seem, Washington needs to stop lecturing Russian President Vladimir Putin if it wants to resolve problems with him.

In George Kennan’s celebrated 1946 “long telegram,” the diplomat and scholar explained why Russia’s conduct was so often duplicitous. Kennan might well have been writing about Putin when he laid out the West’s problems with the Kremlin leaders’ behavior. Being annoyed with them wouldn’t help, Kennan advised, since their conduct was based on a fierce Russian nationalism complicated by a serious streak of insecurity about Moscow’s position in the world, evident whenever Joseph Stalin felt the Soviet Union was not receiving the respect he believed it was due.

We see this pattern in Putin’s conduct today. He insists that the United States “treats Russia like the uninvited guest at a party,” freely interfering in his country’s affairs, which he won’t tolerate — no matter the cost. Confronted with his outright hostility, the West seems at a loss as to how to deal with the bellicose Kremlin.

from Nicholas Wapshott:

The EU-U.S. love-hate relationship

The elaborate gavotte between the American and European economies continues.

While the Federal Reserve has begun to wind down its controversial quantitative easing (QE) program, the European Central Bank (ECB) the federal reserve of the eurozone, has announced it is considering a QE program of its own.

It is a belated acknowledgement, if not an outright admission, from Mario Draghi, president of the ECB, that five years of the European Union’s austerity policy has failed to lift the eurozone nations out of the economic mire. The ECB has presided over a wholly unnecessary triple-dip recession in the eurozone and sparked a bitter rift between the German-dominated European Union bureaucracy and the Mediterranean nations that must endure the rigors imposed from Brussels. All to little avail.

If there are any “austerians” left standing, let them explain this. Ignoring the cries of the unemployed and those pressing for urgent measures to promote growth in Europe, the ECB blithely imposed its punishing creed, arguing that there would be no gain without pain. The result? Little gain, endless pain.

from Compass:

Putin’s action is no surprise

Surprise is the least forgivable sin of statecraft. Yet nothing has so characterized the Ukraine crisis as the West's continuing surprise at Russia's behavior.

The past 30 days have provided almost daily reminders of the deep disconnect between Western expectations of what statecraft would -- and ought to -- look like in the 21st century, and the reality of how the Kremlin seeks to assert its interests in the world.

From the outset of this crisis, the West consistently underestimated the strategic significance of Ukraine, and Crimea, to Russia. The West also assumed that the threat, and subsequent reality, of economic sanctions would alter Russian President Vladimir Putin’s strategic calculus. One month later, Russia has irreversibly annexed a region of Ukraine and left the West divided and floundering in its response.

Reaching for a deal on Crimea

There is a disturbing air of inevitability in Western capitals surrounding Russia’s annexation of Crimea. A growing consensus views this scenario as a rough analogy to  Moscow’s recognition of Georgia’s breakaway regions of Abkhazia and South Ossetia after the 2008 war — perhaps more severe, but still manageable.

Such complacency is misplaced, however. The consequences of the annexation of Crimea are not manageable. The moral high ground we currently occupy isn’t worth it.

Despite Russian President Vladimir Putin’s triumphalist speech on Tuesday, the United States and the European Union should not assume that Crimea is lost. Instead they should be working overtime to prevent annexation.

from Lawrence Summers:

Ukraine: Don’t repeat past mistakes

The events in Ukraine have now made effective external support for successful economic and political reform there even more crucial. The world community is rising to the occasion, with concrete indications of aid coming not just from the International Monetary Fund and other international financial institutions but also the United States, the European Union and the G20.

At one level, the Ukraine situation is unique -- particularly the geopolitical aspects associated with Russia’s presence in Crimea and the issues raised by Ukraine’s strategically sensitive location between Russia and Europe.

At a broader level, the world community has seen many examples over the last generation where an illegitimate, or at least highly problematic, government was brought down and the world community sought to support economic reform and a new, presumably more democratic and legitimate one. Think of the transitions after the Berlin Wall fell or the Arab Spring.

Assessing corporate risk in Ukraine

As the crisis in Ukraine escalates, boardrooms and senior management teams worldwide are now likely talking about the problems of doing business in conflict zones. These regions test the boundaries of risk tolerance.

Any multinational corporation involved in and around Ukraine and Russia must be feeling the impact. Companies such as Italian group Eni and France’s EDF, which signed an offshore oil and gas production-sharing agreement with Ukraine in November, are likely to be monitoring developments. So, too, are Chevron and Royal Dutch Shell, which signed shale gas deals with Ukraine.

Many financial institutions also have exposure. Consider UniCredit, one of Ukraine’s top 10 lenders. International companies involved with Russian finances include Austria’s Raiffeisen, France’s Société Générale, and Citigroup, Morgan Stanley, and Goldman Sachs.

Ukraine: Obama must escape the ‘Cold War syndrome’

When it comes to the mounting crisis in Ukraine, President Barack Obama is stuck playing an old role. Since World War Two, U.S. presidents have steadfastly held to the same course when it comes to Russia.

Obama is but the latest interpreter of the Truman Doctrine, which pledged the United States “to support free people who are resisting attempted subjugation by armed minorities or by outside pressure.”

When President Harry S. Truman threw down that challenge to Congress in 1947, he didn’t use the phrase “Cold War.” He didn’t name the Soviet Union. But everyone knew what he was talking about.

Ukraine after the Maidan

Writing the first draft of history is always difficult, especially when the opening act curtain has not officially fallen. Yet developments in Ukraine have now reached a critical turning point, with certain consequences likely to follow.

Historians will long debate the chain of events that provoked the February 18, 2014 confrontation. What we know is that the simmering demands of the opposition — over Ukraine’s thwarted path to Europe, the failure to re-instate the 2004 Constitution and President Victor Yanukovich’s insincere negotiations – all boiled over in a violent clash with the Ukrainian security services. The fight for Ukraine’s future was being resolved in the streets of Kiev – in live pictures transmitting around the globe.

Two symbols undoubtedly will emerge from the events of the last few days: a heroic Maidan and a bloody Yanukovich. Half the population will not accept the results, but it is also unlikely that Ukrainian opposition can impose its will on the country. So even if the Maidan were somehow to hold its ground and gain the upper hand — and it was still resisting at the time of this writing — a political consensus would still have to be found.

  •