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.
The 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.