Ukraine Unrest

Avoiding Military Force, United States Should Pressure Russia With Economic Sanctions

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In Snizhne, Ukraine, rescue workers on July 15 searched for survivors when an apartment building collapsed after being hit by a missile.
  • Why it matters

    Why it matters

    The West will be hurt financially, too, but use of military force at this point would be irresponsible and even more costly.

  • Facts

    Facts

    • The economic sanctions for its military action in the Ukraine will cost Moscow dearly.
    • Banks worldwide will follow the U.S. lead.
    • After sanctions were imposed against Iran, the U.S. and Germany lost billions in business.
  • Audio

    Audio

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Now it will get expensive — for both sides.

The West is increasing the pressure on Russia. The first serious financial sanctions have been imposed against Russian companies. The sanctions will hit the crisis-ridden leviathan empire hard. Don’t be fooled by the Russian propaganda machinery with its slogans of “Nothing can bother us.”

With enormous income from the export of oil and natural gas, almost $500 billion (€370 billion) in foreign exchange reserves, a broad-based industry — Russia would see immune to sanctions. That’s a fallacy.

The slogans from Moscow are similar to ones we know from Iran. That rich oil-producing country also once scoffed, “The West can’t hurt us.” A short time later the country was at the negotiating table.

Ultimately, the West cannot stop (Mr. Putin). But it can make it very expensive for Russia. That many in the European Union don’t want hard sanctions against Moscow is understandable, since France and Italy, who are the most economically engaged there after Germany, can’t afford losing the giant Russian empire as a market.

 

Iran is not Russia. But both are industrial nations, rich in oil and gas, and otherwise comparable. And both are vulnerable. When the United States forbids its banks to give credit to Russian companies, banks worldwide join in, no matter whether it conforms to the particular nation’s laws or not, since no financial institute wants to be prosecuted later by the SEC or another American authority and be fined millions.

Furthermore, Washington has another ace up its sleeve: If the Americans forbid Russians from using dollar transactions, Moscow is substantially finished. That is something to know by those who think the West has no teeth if it doesn’t intervene militarily.
But should the West really bite? Imposing of tighter sanctions against Russia is, at this point, the right thing to do. Kremlin chief Vladimir Putin is a master of the strategy of “two steps forward, one back.”

Malaysia Airlines plane crashes in eastern Ukraine
Pro Russian soldiers patrol the area in front of a piece of wreckage from the Malaysian Airlines crash in the eastern Ukraine. Source: DPA
Malaysia Airlines plane crashes in eastern Ukraine. Source: DPA.

 

Before the last major E.U. meeting, he held back militarily in eastern Ukraine but is again destabilizing at full force. Putin does not want to leave Ukraine alone.

Ultimately, the West cannot stop him from doing so. But it can make it very expensive for Russia. That many in the European Union don’t want hard sanctions against Moscow is understandable, since France and Italy, who are the most economically engaged there after Germany, can’t afford losing the giant empire as a market.

The Iran experience illustrates how sanctions are expensive for everybody. After sanctions were imposed, the U.S. lost up to $175.3 billion in business and Germany, according to the National Iranian American Council, lost up to $73 billion.

A steep price — but justifiable now if one doesn’t not want to use military means to stop Moscow. That would be irresponsible and even more expensive. But doing nothing would be almost as irresponsible and only cheaper in the short-term.

Mathias Brüggmann is an international correspondent. He can be reached at: brueggmann@handelsblatt.com

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