Curbs against Russia an exercise in futility

The crisis over Crimea is, arguably, the worst to hit Europe in this century. In the current case, sanctions against Russia are widely regarded as more bark than bite. The EU simply cannot afford sanctions, unless Europeans want to commit economic suicide and freeze in their homes as the second Ice Age descends on them.

THE face-off between the US-led western powers and Russia over the annexation of Crimea seems to have cooled somewhat. Both sides appear to be backing off and President Putin has had the fifth telephone conversation with President Obama, this time initiated by the former. Russian Foreign Minister Lavrov and US Secretary of State Kerry have met again in Paris, presumably to explore avenues to defuse the crisis.

Putin has ordered a partial withdrawal of Russian troops along the eastern borders of Ukraine that are poised as a warning to Ukraine to roll back its moves to join NATO and deal with its Russian minority sympathetically. Russia has also raised the price of gas that it supplies to Ukraine as a punitive measure. US Secretary of State continues to maintain that the Russian takeover of Crimea is "illegal and illegitimate”, but both sides have talked about using diplomatic means to resolve the crisis. This is shorthand for continuing talks and hoping that the crisis does not exacerbate.

Meanwhile, the western powers have scrambled to provide support to the Ukrainian government struggling to maintain its writ over its Russian-dominated eastern region. After much posturing and rhetoric, the US and EU have resorted to sanctions against Russian officials and selected individuals, and Russia has retaliated with its own sanctions against US and European politicians and individuals.

UN sanctions

A noteworthy feature of this confrontation is the imposition of sanctions by the West and retaliatory sanctions by Russia. The nature of sanctions has also generated mocking comments from Russian and US politicians. Russian Deputy Prime Minister Dmitry Rogozin mocked the visa ban imposed on him, saying he had no intention of visiting the US. Senator John McCain, whose chest-thumping militarist posturing in defence of Ukraine’s sovereignty and territorial integrity has attracted much attention, mocked the sanctions imposed on him, saying that his Siberian holiday has been put on hold and his "secret account” in Russia frozen.

International economic sanctions have been in use for a long time. Truly effective sanctions are those imposed by the UN Security Council when there is consensus among its permanent members. It has imposed such sanctions twice in the first 45 years since it was established — against Rhodesia (now Tanzania and Zimbabwe) in 1966 and apartheid South Africa in 1977. During the 1990s, it imposed partial or comprehensive sanctions over 16 times. The UN and US imposed comprehensive economic sanctions against Iraq for its invasion and annexation of Kuwait. After a period of diplomacy and military buildup, the first Iraq war led to the liberation of Kuwait and the defeat and overthrow of the Saddam Hussain regime.

Military implications

During and after the Cold War, the US has led the field in imposing sanctions in pursuit of its global geo-political goals. Such sanctions signal the US resolve to maintain the current global order without taking the route of military action. Smaller nations are never immune from western military actions (Yugoslavia, Iraq, Libya, Afghanistan and Syria) but larger more powerful nations deter the military option. Thus Russia, China and India have all faced sanctions on different occasions. The US imposed economic sanctions against the Soviet Union in 1983 after the downing of the South Korean airliner that had strayed into restricted Soviet airspace. The Tiananmen Square incidents led to the US imposing sanctions to assuage domestic US opinion and to make a moral statement. US sanctions against India after the 1998 nuclear tests were also designed to force India to sign the CTBT unconditionally. India was also sanctioned after the 1974 "peaceful nuclear explosion” and several technology denial regimes were created by the US and allied nations to coerce India into falling in line and sign the NPT. None of these sanctions achieved their objectives.

Stick to India

The US is currently engaged in targeting the Indian pharmaceutical industry with threats of sanctions because it sees a threat to its pharmaceutical companies from generic drugs. It has used various methods to ban the export of drugs from Indian companies to warn against compulsory licensing and the refusal of the Indian judiciary to approve evergreening of patents. The US and India are friendly democracies with converging interests but that does not prevent the US and its bureaucracy, under the influence of powerful commercial lobbies, to target friends and foes alike. Such is the nature of a predatory global power, defending its waning hegemony in the global power hierarchy. More recently the UNSC and separate US sanctions against Iran, for its nuclear weapons programme, have had adverse economic effects on Iran. US financial sanctions have led to reduction in imports of Iranian oil by many countries, including India.

As long as tit-for-tat sanctions remains on the books against individuals, not much damage will be done, except to hit individual Russian billionaires and give an ego boost to the sanctioned individuals, as is evident from the reactions of US politicians.

Counterproductive

If real sanctions are imposed against Russia, they would hurt the West too, particularly Europe. Sanctions have always been seen as double-edged, hurting the economic interests of all concerned, living as we do, in a highly integrated world. If the US and EU decide to sanction Russia’s financial, energy and mining sectors, the entire situation will turn very nasty. Take the energy sector for example. Russia exports around 130 billion cubic metres of gas to the EU, via pipelines, sections of which run through Ukraine. Banning gas imports will certainly hurt Russia to the tune of over $70 billion but it will also devastate EU countries that depend on Russian gas to the extent of 30 per cent. Poland depends on Russian gas to the extent of 91 per cent and Hungary for 86 per cent. Some countries like Greece, already reeling under an economic crisis, will simply collapse given its dependence on Russian gas to the extent of 55 per cent. French banks’ exposure is to the tune of over 20 per cent of their overall lending to Russian companies, 68 Russian companies trade at the London Stock Exchange and over a million Russian tourists keep the Italian tourist industry afloat.

The EU will have no appetite for taking a masochistic approach to diplomacy. Germany, the largest economy in the EU, can hardly stop consuming Russian gas (30 per cent) or risk putting $1.1 billion invested by its engineering giant Siemens in Russia.

Punitive sanctions in the energy sector will impact US energy companies such as ExxonMobil. For example, ExxonMobil and Rosneft of Russia signed an agreement in 2011 for oil drilling in the Arctic worth around $500 billion. If ExxonMobil has to abandon this agreement and other agreements with Russian companies, it will suffer a grievous blow and cause a huge upset in the global oil and gas market. There will be too many losers. Nor can the US replace Russian gas, though it has dangled the issue of exporting surplus shale gas and hinted that the EU should overcome its environmental-led diffidence in permitting exploration for shale gas in Europe.

The infrastructure of exporting US gas to Europe cannot be created overnight. LNG terminals are highly capital intensive and building undersea pipelines can take decades and face technological challenges. The US companies are eager to open up the EU market for gas and have stared lobbying lawmakers, as is the military-industrial complex that seems to have smelt a golden opportunity to roll back cuts in defence expenditure by the Obama administration.

UN resolution

Putin understands the challenges and vulnerabilities of the US and EU. As a permanent member of the UNSC, Russia vetoed the resolution introduced by the US, calling upon countries not to recognise the Crimean referendum, though 13 countries voted for it, with China, another permanent member, abstaining. In a subsequent vote in the UN General Assembly, 100 countries voted against Russia, 11 for and 58 abstained in the 193-member Assembly, with 24 countries not voting. India abstained and has announced that it will not participate in any sanctions regime against Russia, while reaffirming its commitment to sovereignty and territorial integrity of nations. The West made much noise about Russia’s isolation. The fact remains that the UNGA resolution is symbolic and non-binding and has no effect on sanctions or anything else. Moreover, the large emerging economies like Brazil, China, India and South Africa (BRICS), the countries of the Shanghai Cooperation Organisation (SCO) and many other countries will continue to ignore sanctions against Russia.

Russia also holds other cards. Its gas will flow into China when Gazprom signs the deal for supplying 3.75 billion cubic feet of gas for 30 years, beginning 2018. This deal could be worth over $1 trillion. India will also look forward to investing more in the Russian oil and gas sector to meet its energy requirements. Russia and China may well decide to deal in either yuans or roubles, severely undermining the petrodollar that has ruled the roost. This would be another step towards nudging the dollar of its perch as the international reserve currency.

Most countries would agree that Russia violated international law by sending military personnel into Crimea and "arranging” the referendum for annexation. There would be consensus that western nations have intervened in Serbia, Iraq, Libya, Afghanistan and Syria. The West takes the moral high ground when its suits its interest and pretends that its intervention is good for rights, democracy, open markets and a liberal order. Yet the outrage against Russian annexation makes it a champion of hypocrisy.

Crimea was a part of the Russian empire since 1783, and in 1921 it became a Soviet autonomous republic. In 1954, the Soviet leader Nikita Khrushchev, a native Ukrainian, decided to hand over Crimea to the Soviet Socialist Republic of Ukraine. In 1991, Crimea became a part of independent Ukraine.

Russia’s takeover was not inevitable but the West crossed a line when, after months of unrest, it caused the overthrow of the pro-Russian Ukrainian President. The prospect of Ukraine joining NATO was too much of a provocation for Russia to swallow and that explains its reaction to protect its interest in Crimea. Russian troops remain deployed along Ukraine’s eastern border.

The writer is a former ambassador and has served as a Secretary at the Ministry of External Affairs, New Delhi, besides Indian Missions abroad.

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