Crisis has struck in Crimea and spiraled across the Western world, but how far will Russia go?by Jonathan Eyal / March 4, 2014 / Leave a comment
“Russia’s takeover of Ukraine’s strategic Crimea region will neither be accepted, nor go unpunished”
© PA Images
European Union heads of states and governments are gathering on Thursday for an unprecedented summit to deal with the crisis in Ukraine. In public, Europe and the US are united in demanding that Russia should halt its military intervention, and in warning that Russia’s takeover of Ukraine’s strategic Crimea region will neither be accepted, nor go unpunished.
But with all military options ruled out, the frustration in Europe is palpable: the diplomatic and economic sanctions currently being contemplated by the EU and the US against Russia will have little impact on the Kremlin’s immediate behaviour, while the measures which can really hurt Moscow remain firmly off the table, as Western governments scramble to protect their national economic interests from the sudden chill in relations with Russia.
As the EU foreign ministers’ meeting in Brussels on Monday indicated, Europe’s diplomatic disarray may be deepening. For the moment, the EU has not even reached a consensus on how quickly any sanctions should be imposed on Russia, or agreed what these sanctions might be. Recalling their past history of military bullying, former communist countries are demanding that Russia should be punished immediately, especially Hungary, which suffered a Soviet-led invasion in 1956 and the Czech Republic which experienced a similar invasion in 1968.
But other European governments remain circumspect. “We must replace confrontation with dialogue”, said the Spanish foreign minister José Manuel Garcia, a statement for which he provided no explanation. Frans Timmermans, his Dutch counterpart said: “We have left the Cold War behind and there is no reason to revive it,” another statement devoid of substance.
Sanctions, described as “targeted”, will be imposed on Russia by the US and EU as early as the end of this week. These will include travel bans on Russian politicians, a freeze on the bank accounts of Russia’s billionaire oligarchs and the potential exclusion of Russia from the G8. But imposing even these limited sanctions will not be easy, and their impact is largely symbolic.
A “black list” of Russian officials not allowed into the US already exists and was mandated by Congress in legislation that the Obama administration initially opposed. This list will now be expanded and copied by the Europeans. But making it extensive enough to really hurt will also restrict Europe’s room for diplomatic manoeuvre. Should all top Russian ministers be on this list? If yes, then we won’t have anyone to deal with. Should military commanders be banned from obtaining visas? Again, this sounds good in theory, but less good for the prospects of future defence confidence-building measures.
Freezing oligarchs’ funds deposited in Europe and the US is also easier said than done. Western intelligence agencies are loath to disclose what they know about such accounts, since following the financial transactions conducted through them yields important bits of information about the inner workings of the Russian government. Any order to freeze money is likely to be challenged through the courts by the account holders. And it will be a legal maze to deal with the numerous “shell” companies Russian oligarchs use for managing their financial affairs.
Kicking Russia out of the G8 is not a big deal. President Putin likes being photographed with other top world leaders, and was looking forward to hosting this year’s summit in Sochi—not far from the Crimean peninsula. But the G8 is an informal club that makes no binding decisions and offers no financial advantages; it was already little more than a photo opportunity, and an awkward one, as the spats between Russia and the West multiplied over the past few years. Putin can transform his eventual eviction from the G8 into a matter of principle: he can easily brush the G8 off as a relic of a Western-dominated past, and instead lavish attention on other major developing nations, such as India, China and Brazil.
Does this mean that Europe is impotent? In the short-term, yes, but that’s always the case when dealing with an armed aggressor, unless military action is proposed, which is not the case with Ukraine. But short-term impotence should not be confused with medium-term leverage, which Europe and the US have aplenty.
The EU is Russia’s largest trade and investment partner, generating around €300bn of annual turnover, but Russia is only the EU’s fourth-largest trading partner. Most politicians talk about Germany’s dependence on trade with Russia; few, however, have noticed that Germany’s trade with Poland is now bigger that Berlin’s trade links with Russia. While much of the trade is protected from politically-motivated sanctions due to Russia’s membership in the World Trade Organisation, foreign direct investment is not, and drying out the sources of capital for the Russian economy will be a big blow for Moscow. The rouble is already in free-fall on world financial markets precisely because of this danger.
Restricting the freedom of Russia’s banks and corporations to conduct business will also hit Moscow’s economy badly. And NATO could start planning for the prepositioning of Western military bases on Russia’s borders, a move which will seriously affect Russian security and one that President Putin was always anxious to avoid.
The counter-argument is that Russia would retaliate by switching off its oil and gas supplies. But will it? Russia cannot drink its own oil; it has to export it to survive, and gas deliveries cannot be diverted to other customers easily (at least not the pipeline deliveries on which Russia depends). Gazprom is already embroiled in disputes over the price of gas with electricity-generating companies in Germany and any violation of the delivery contracts would rekindle a much bigger dispute over pricing which Moscow is desperate to avoid. The effect of shale gas be ignored.
Besides, Europe currently has stocks equivalent to about a tenth of the continent’s yearly energy consumption, and spring is approaching, so these stores should help to cover any supply interruption. There is a reason why during this crisis Moscow has not threatened to cut off oil and gas supplies: the Kremlin knows this would be an own goal.
In an embarrassing British leak, a top official accidentally allowed his briefing papers to be photographed by the media, revealing that David Cameron’s government opposes any discussion about moving NATO military bases closer to Russia. It is certain that this issue will be raised by the central Europeans and even by the Obama Administration, which is looking for ways to restore the president’s foreign policy credentials.
Frank-Walter Steinmeier, Germany’s Foreign Minister indignantly rejects accusations that the EU’s muted response to the Ukraine crisis is an indication of weakness. Instead, he claims that Europeans are deliberately cautious because they want to manage the crisis, and “crisis diplomacy is not weakness”.
The German diplomat may be right: Russia holds the initiative now, but Putin may pay a big, long-term price for his behaviour.