Why sanctions against Russia will boomerang


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People in all free-thinking countries should applaud the US call for sanctions against Russia. Why? Because it exposes the West’s complete inability to use the military option. Even if President Vladimir Putin sends all four divisions of the Russian Airborne Forces into Ukraine, the US and its allies can do little but watch from the sidelines.

As the US Congress leads the strident push for an economic boycott and the western media keeps up the blitzkrieg of hatred against Russia, what is being ignored is that sanctions are a double-edged sword that will hurt everyone in a globalised economy. Sure, Putin will lose sleep but only because he will be laughing at the West’s clumsiness.

Russia isn’t Iraq or Libya (which NATO took nearly three months to subdue militarily). The 1990s are a distant memory when former Russian president Boris Yeltsin and his cronies in the Kremlin were being remote-controlled from the White House. Back then, the bear had retreated from the geopolitical stage. A stark example was Russian foreign minister Andrei Kozyrev refusing to meet Mani Dixit, the foreign secretary of Russia’s closest ally, in January 1992.

Emergent Russia is no longer threatened by a terminally declining West. After 14 years at the helm, Putin no longer has the job of saving the largest country on the planet. That file is closed. Because of his astute diplomacy, especially during the Syrian crisis, America’s attempts to put Russia in a box have failed.

Sure, militarily Moscow today is a shadow of the mighty Soviet Union but it is still a great power. In August 2008, the West received a reminder of that strength when the Russian Army walloped Georgia’s US-trained forces in a matter of days. Plus, Moscow has the largest number of strategic and tactical nuclear weapons on the planet. As Russian television anchor Dmitry Kiselyov — known to be close to Putin’s inner circle — said this week, Russia is “the only country in the world capable of turning the USA into radioactive dust”.

So why can’t the army of western analysts and think tanks see the dangers of bear-baiting? Short answer: blinding hatred. The push for sanctions is coming from people who cannot come to terms with the fact that Russia has once again become a counterweight to western might. These are the same people who cannot sleep at night because the likes of China, India and Brazil are now sitting at the high table.

The UPI’s Martin Walker says Putin is “a ruthless carnivore in a Europe of soft vegetarians. He is a ruthless rogue running an aggressive rogue State”. This is not journalism, this is hate-mongering. There is not one newspaper editor (among the thousands) in India who would allow such comments to be published. It is this hatred that blinds the West to the realities of the post-western world.

Then there is the KGB syndrome. There is an entire army of western commentators whose pet phrase is: “As a former member of the KGB, Putin’s worldview is fossilised.”

Anyone with even a smattering of knowledge about the KGB will agree that the erstwhile spy agency, despite all its faults, was one of the most adaptable outfits in a closed system. If anything, a former KGB officer is most likely to be the owner of a business or some enterprise — even criminal — in the new Russia. That’s because KGB officers were an elite breed who could multitask and were multilingual, giving them the edge in a capitalist society. Plus, the secret service’s agents had a worldview that the average communist party leader lacked.

His KGB past explains why Putin — who speaks fluent German — is the antithesis of a typical Russian politician. It is also why former German Chancellor Gerhard Schroeder works for him at Nord Stream, the pipeline that now transports gas directly to Germany, bypassing troublesome Ukraine and the Baltic States.

The US has for long dreamt of getting a toehold in Ukraine in its relentless quest to become the pre-eminent power in the Eurasian landmass — extending from Lisbon in the west to Vladivostok in the east.

Washington’s geopolitical handbook is The Grand Chessboard: American Primacy and its Geostrategic Imperatives. In this arrogant tome, former US national security adviser Zbigniew Brzezinski says by creating instability in every country in Russia’s neighbourhood, especially in the Central Asian ‘Stans’ and Ukraine, and disrupting the flow of oil and gas, the US can isolate Russia. Moscow will then cease to be a great power.

Brzezinski, a Pole, openly espouses provoking instability by exploiting the ethnic and religious diversity of the region. The grand idea is to create an “arc of instability” extending from Afghanistan to the Stans in the southern part of the former Soviet Union.

Now, Ukraine is an insanely industrious country, with a fertile bread basket in the west and a highly industrialised east. If the country’s 44 million people are added to the western alliance, it would be a huge untapped market for American armament companies and German consumer goods.

Plus, in the backdrop of an ageing West, the well-populated Ukraine is expected to provide soldiers for tomorrow’s NATO.

The neo-Nazi, rabidly right-wing and anti-Semetic elements from western Ukraine have also been eager accomplices in western military misadventures in both Iraq and Afghanistan. Also, in the 2008 war between Russia and Georgia, Ukrainian missile gunners embedded with the Georgian military shot down a Russian aircraft. Members of the Ukrainian right wing — who annually celebrate their World War II collaboration with the Nazis — have even fought in Chechnya.

Russia is understandably concerned about having NATO at its borders. Like any major power, it is entitled to keep its neighbourhood safe and friendly. Hasn’t the US declared Russia would cross “a red line” if it were to base nuclear capable bombers in Cuba?

Considering the high stakes involved, the Kremlin’s response has been remarkably restrained. “During the months of stand-offs in Kiev, Russia’s actual role was much more modest than advertised by the international media or the rumour mill in Kiev,” says Dmitry Trenin, director of the Carnegie Moscow Center. “The Russian ambassador to Ukraine, Mikhail Zurabov, was conspicuously absent from public view. The Kremlin ordered all Duma members to stay out of Ukraine.”

The Crimean referendum is being described as a Soviet-style rubber stamp election by western commentators. But even they will concede the enclave was conquered by Tsarist Russia from the Turks. During the medieval era, it was a staging post for the local Tatars to launch raids into southern Russia for carting off Russian women and children to be sold in the slave markets of the Turkish empire. The territory was symbolically transferred to Ukraine for administrative purposes.

In fact, after the Ukrainian nationalists took over the country by deposing the elected president, the first thing they did was ban the use of Russian as an official language. More than half of Ukraine’s population speaks Russian regularly and one third say it’s their native tongue. In Crimea, more than 90 percent of the population uses Russian on an everyday basis.

Only those who live under a rock — such as Senator John McCain, Victoria Nuland of the US Department of State and Ukrainians who have attained positions of power after a violent coup — will disagree that Russia is a wealthy country. Currently, Russia’s GDP per capita is the highest of all the BRICS countries. By 2020, the Russian economy will become the largest in Europe. FDI into Russia rose by 83 percent in 2013, reaching $94 billion, the third highest in the world after the US and China. That looks like a country everyone wants to do business with, not boycott.

This isn’t 1980, when president Jimmy Carter — a peasant way over his head in events he couldn’t begin to understand — led the US and its allies to impose blanket sanctions on the erstwhile Eastern Bloc. Today, on the other hand, there is a great deal of interdependence between the Russian and European economies.

The US business community has clearly stated it wants to avoid unilateral sanctions against Moscow because it believes competitors in Europe could gain market share as a result. “We in the business community do not want to be caught in the crossfire,” says Myron Brilliant, executive vice-president of the US Chamber of Commerce.

Arnaud Leclerc, managing director of Swiss private banking firm Lombard Odier, believes sanctions would harm the US. “In 2013, Russia exported goods worth $27 billion to the US and imported goods worth $11 billion from the US,” he says.

Europe has its own interests to protect. The European Union currently ranks as Russia’s No. 1 trading partner, accounting for almost 41 percent of all trade. Germany has invested heavily in Russia’s manufacturing sector, while nearly 6,000 UK traders exported goods to Russia last year. Nearly 10 percent of Britain’s car exports are to Russia, and an even higher proportion of Germany’s.

The Russian oil and gas pipeline network — 259,913 km long and able to loop around the earth more than six times — is the lifeline of Europe. Germany gets half of its daily consumption of 2.8 billion barrels of oil from Russia mainly via the Druzhba pipeline through Belarus. In 2012, Russia accounted for 24 percent of all gas exports to Germany, 19 percent to Turkey, 11 percent to Italy, 6 percent to France, 6 percent to the UK, 10 percent to other countries in western Europe and 24 percent to eastern Europe.

In the backdrop of such dependence on a single supplier and the fact that these supplies cannot be compensated for quickly, talk about slapping sanctions carries no weight. The alternative for Europe is to import Qatari gas. But this has a nasty downside — Qatar is one of the world’s leading exporters of Islamic fundamentalism as well as of jihadi fighters to Syria. Every euro paid for Qatari gas goes to strengthen the forces that could one day come back to haunt Europe.

Russia has proved to be quite nimble at responding to blackmail. One outcome of gas blocking by Kiev was Nord Stream. Further attempts to turn off the gas spigot will mean the green signal for the South Stream pipeline, which will again bypass Ukraine. In such a scenario, Kiev will find itself totally out of the high-stakes hydrocarbons game, losing huge transit fees as well as subsidised gas from Russia.

The Russian economy is focussed on energy and mineral exports but it is certainly not “dangerously dependent” — as the western media depicts it — on hydrocarbons. It misses the point that the demand for oil and gas is not seasonal or cyclic but permanent. With China and India showing no signs of cutting back on their energy consumption, life is a non-stop party for the world’s energy exporters.

Curiously, the words “dangerously dependent” are never used when it comes to describing the situation of NATO member Norway or the Gulf satellites such as Saudi Arabia, Qatar, Bahrain and the UAE, which are truly dependent on hydrocarbons for their daily bread.

Russia has large reserves of dollars and is active in the US debt market. Currently, it holds $490 billion, the fifth largest reserves in the world. According to presidential adviser Sergei Glazyev, one option before Moscow is to abandon the US dollar as a reserve currency, or to figure out a way to use a new payments system that is not reliant on US dollars for international transactions.

Glazyev, who’s known to be close to the more nationalist members in the Kremlin, added that if the US freezes the accounts of Russian businesses and individuals, Moscow will recommend to all holders of US treasuries to sell their US government debt. Although his opinions were described as personal, ominously for Washington the USD Index fell marginally before recovering.

Because the dollar is the single biggest factor that ensures America’s dominant position, the currency’s debasement could hasten the inevitable end of its free lunch.

Glazyev may have been hinting at the India-Iran Rupee Trade Mechanism where New Delhi purchased Iranian oil with rupees and Tehran used those earnings to buy essentials from Indian merchants. Although the rupee and the rouble are not as freely tradable as the dollar, they are increasingly gaining acceptance around the world. China and Brazil are also keen on giving the anti-dollar movement some momentum.

Russia could make America’s retreat from Afghanistan a hellish experience. A key supply line, known as the Northern Distribution Network — which brings food, water and war materials that keep the US’ longest war going — runs through Russia and former Soviet republics. If Putin decides to shut down the network, the only alternative for the US military would be to be totally dependent on the Pakistan route. America’s nightmare scenario is to be trapped between the Pakistani Taliban — which has an irritating habit of setting alight supply trucks — and the Afghan Taliban in the north.

The West is aiming to impact the ability of wealthy Russian individuals to operate freely in the western banking ecosystem. There are two reasons for this. “The US and other western powers are focussing on individual, targeted sanctions because broader economic sanctions could directly harm western businesses and lead Moscow to make good on its threats to retaliate against businesses from the countries pushing sanctions,” says The Wall Street Journal.

Secondly, Russian oligarchs close to Putin routinely keep their assets in western banks. Those leading the push for sanctions hope the Russian business and political elites fearful of losing their vast foreign holdings will shift their loyalties away from Putin.

That ship has sailed. It is true the Kremlin once followed the policy of looking away from corruption in exchange for loyalty. But that was when Putin and his team were political newbies and wanted powerful backers. Today, Putin is more worried about public opinion than the oligarchs’ loyalties.

At any rate, if Russian firms are barred access to western banks, there’s always China. With reserves of more than $3.2 trillion, Beijing is becoming a key player in the international lending sector. For instance, India’s Reliance Power has taken a $1 billion loan from three Chinese banks for a power project.

Sanctions will hurt all sides but the Russian threshold of hardship is a lot higher than the West’s. Plus, it’s certainly not the best of times for westerners to bear further agony. In Greece, for instance, people are abandoning their young children in the streets; one in 10 people in Ireland cannot afford a meal; while British women in the inner cities are eating once a day so their children can be fed. Across the Atlantic, over 50 million Americans face chronic hunger.

The LIBOR scandal and the prolonged recession have left the global economy and financial system extremely vulnerable. Under these circumstances, boycotting a large trading partner is being needlessly self-destructive.

The author is a journalist and strategic affairs expert. A shorter version of this article was published by Russia & India Report, a division of the Rossiyskaya Gazeta Group



  1. Interesting. Its nice to know how all this fanfare about Russia teaches us things about the international markets and politics that we would otherwise not know about.

  2. Many distinguished editors in Indian Media have not been weaned of the col war doctrine of India and Russia against the world for ever. Marriage made in heaven? I think we should veto this idea – after all that is the only reason we need the Ruski’s these days.

    If may be out of cold war loyalty that many Indian Journalists and Foriegn Policy establishment support Russia. The fact is Indian Culture and Economy are more tied to the West. (and USA in all its glory and grime) than they ever were to Russia (and its g&g).

    Unfortunately whilst Germany and Japan were able to uplift themselves from complete annihialation, only a creamy layer did so in India. A nation that enjoys 5 million dead children per annum should perhaps judge international events through the eyes of its least privilaged. If West did not win over USSR, Indian capitalism and its consequent booms in fields such as IT, Infrastructure, Pharma would have not materialised.

    Apart from the wonderful Russian veto, India owes more to the ideas prominent in the west than in Russia. A ‘free’ press is one such idea which RUssian Citizens do not share with India.

    So it is with bemument, i view the archaic articles like this which seem to support Russia, over another weaker friend of ours (which was a part of USSR and also produced military hardware for India) – Ukraine.


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