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No Easy Options in Russia Sanctions Over Crimea Land Grab

Vladimir Putin’s annexation of Crimea on Tuesday increases the pressure on western governments to hit Russia with tough sanctions but, as momentum for action grows, there are no easy options.

Trade and economic sanctions could do real damage to the Russian economy and Moscow’s power of reprisal is limited, analysts say.

But punitive measures would not come without a price for the countries adopting them, hence the diplomatic horse-trading currently going on over the share-out of the burden.

US Vice President Joe Biden warned Tuesday that further sanctions were inevitable, and, in the first concrete reaction to Putin signing a treaty reintegrating Ukraine’s Crimean peninsula into Russia, Britain suspended military cooperation and arms exports.

The move will increase the pressure on France to follow suit by refusing to deliver the advanced Mistral warships it promised to Russia under a controversial 2011 accord.

But will Paris really be prepared to put a $1.4 billion dollar contract and 1,000 shipyard jobs on the line?

Not immediately anyway, Foreign Minister Laurent Fabius indicated.

“On the one hand we cannot envisage supplying Russia indefinitely with arms given the way it has behaved, on the other hand there is the reality of jobs and the economy,” Fabius said.

The minister made it clear that, if France were to take such a drastic step, it would expect Britain to match it by targeting London-based oligarchs with the power and influence to drag Putin to the negotiating table.

But can David Cameron’s government afford to alienate the Russian super-rich who pumped more than £500 million pounds into London’s property market last year, contributing to a broader recovery of prices that has, in turn, lifted the wider economy?

Similarly Germany could block energy giant RWE’s planned sale of a subsidiary to a Russian-controlled group, but does it really want to jeopordise a 76-billion-euro trade relationship or risk Moscow cutting off its gas supplies?

“Sanctions always hurt those who apply them, sometimes more than those who are targeted,” says Gian Maria Fara, the president of Italian think tank Eurispes.

“And for those subjected to sanctions, an external enemy inflicting pain on the country is always useful.

“The (Italian) Renzi government has backed the European position, with its grand declarations of principle, but in reality it is business as usual.”

 

– Sanctions pressure mounting –

 

Prior to Britain’s move on Tuesday, international action against Russia had been limited to asset freezes and visa bans targeting a handful of individuals involved in the process that led to Crimea returning to Russian control.

Options that would be tougher in terms of symbolism — such as expelling Russia from the G8 or asking Putin to stay away from the D-Day anniversary commemorations in June — have been left unused so far.

But German Chancellor Angela Merkel has appeared to be preparing the way for a switch to actions that may have a painful kickback for European companies.

“We have interests in Russia, but they also have interests,” she said. “We have to insist that international law is respected and we cannot stand by and do nothing as it is swept aside.”

Francois Heisbourg, of France’s Foundation for Strategic Research (FRS), notes: “Germany’s employers and unions are united in their opposition to any sanctions.

“But the Russians have a lot more to lose from sanctions than the Europeans — Russia represents about one percent of EU external trade but the EU accounts for 50 percent of Russia’s.”

Heisbourg argues that the notion of EU dependence on Russian gas is overblown. Stocks are high on the back of a mild winter and the shale gas revolution in the United States has made it easier to source alternative supplies.

Against that backdrop, Merkel’s recent shift of tone on Russia from soothing to stern is significant, Heisbourg argues.

“The Europeans learned, with Iran, how to put an economic and financial sanctions regime in place and organise it in an effective way.”

A top foreign policy aide to Putin on Tuesday ridiculed the steps taken by the west so far as worthy of “irony and sarcasm”.

But according to Dominique Moisi, of the French Institute for International Relations (IFRI), the Russian leader would be wrong to underestimate the possibility of a tougher raft of measures and their likely impact.

“You can feel already that big players in the economy and the stock market are getting nervous over Russia’s growing isolation.

“The US and European positions on sanctions are getting closer. I can see the US Congress adopting far-reaching measures that will affect third countries who continue to do business with Russia and the Europeans will be obliged to follow.”

 

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