Resources Roulette

With Retaliatory Sanctions Against the West, Putin May End Up Worsening Russia's Isolation

Putin's anger could be harming his country. Source: DPA
Putin's anger, and his threat of retailiatory sanctions against the West, could end up harming his own country.
  • Why it matters

    Why it matters

    Fallout from the sanctions dispute could have huge economic implications.

  • Facts

    Facts

    • Moscow is poised to raise natural-gas prices significantly for Europe as punishment for E.U. sanctions.
    • Long-term delivery contracts exist with price formulas that can’t be altered unilaterally.
    • President Putin’s determination to retailiate against western sanctions could end up harming his own people.
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    Audio

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Iranian pickles can be purchased by anyone walking into a French supermarket chain in Moscow. Whoever needs a car in Russia can choose from a variety of foreign brands. Tractors made in Belarus pile up in front of a factory in Minsk because Russian farmers prefer to buy machines from Germany, America or Italy.

The Russian government has been trying for years, by means of incentive programs and protective tariffs, to prop up domestic industry and discourage foreign suppliers. The attempts have accomplished absolutely nothing.

Is all this supposed to change suddenly, simply because President Vladimir Putin is threatening the West with counter-sanctions? The threats are scarcely credible, and nobody in the West should be cowed by such statements.

It sounds worrisome when Moscow threatens to raise natural-gas prices significantly for Europe as punishment for the E.U. sanctions. That would be extremely difficult for Russia to accomplish. Long-term delivery contracts exist with price formulas that can’t be altered unilaterally.

Otherwise, Russia would be judged by an international arbitration court just as severely as was the case last week in legal proceedings instituted by ex-shareholders of Yukos, the now-defunct oil company seized by Mr. Putin’s government. He faces another big problem: Natural-gas production can’t be stopped as easily as oil production.

Where is Mr. Putin supposed to sell the natural gas intended for Europe? There are no other delivery pipelines. If he were to allow the unused gas to go up in smoke over Siberia, Russia would lose billions.

Mr. Putin is digging a hole for himself. Russia, despite crises, was always dependable as a gas supplier, which served as a standard argument for people in politics and economics who were called “Russia sympathizers.” Now, Mr. Putin seems to be confirming long-held fears held by others that Russia could use energy as a weapon.

The long-term consequence: In Europe, the discussion about how to become more independent of Russia will quickly gain momentum. Russia’s economy would suffer in the long term. Mr. Putin’s helpless anger is harming his own country.

Despite Russia’s size and reputation in many industrial sectors, the country isn’t able to provide for itself.

Mr. Putin also is threatening to ban the importation of European foodstuffs. The boycott of fruit from Poland, which has been particularly outspoken in its criticism of Russia, is just the beginning. But Mr. Putin shouldn’t forget his people rebelled against the Soviet Union’s economy of scarcity in which a few Cuban oranges were available in winter, and one had to stand in line to buy the few bananas imported from Nicaragua.

Then, the Soviet Union had its own gardens with fruit and vegetables in Georgia, Ukraine and Moldavia. But now these countries as well are supposed to be economically hectored because of their sympathies with the European Union. Moreover, Russians have become accustomed to BMW, VW, Mercedes, Toyota, Ford and Hyundai. They don’t want to climb back into Ladas, Volgas or Moskvitches.

Despite Russia’s size and reputation in many industrial sectors, the country isn’t able to provide for itself. And it can’t change the situation quickly. Even if more domestically-made machines were to be used in the future, the development would carry a high price, namely the desperately needed innovations in a dilapidated industrial landscape dominated by extraction of raw materials.

Mr. Putin proclaimed Russia will become stronger because of the sanctions and will ratchet up domestic production. Iran made similar claims after tough sanctions were imposed on it. In the end, Tehran had to back down and negotiate about its nuclear program. Things won’t be different for Russia.

Mr. Putin’s goal is to get his way by dividing the West, playing the European Union off against the United States and sparking disputes among E.U. members. His opponents must keep a cool head and not become irritated by threats — even if his counter-measures hurt the West economically and Mr. Putin makes it harder to resolve the Syrian conflict and reach a nuclear deal with Iran.

There is a life after Mr. Putin — for us and Russia.

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

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