Russia and Ukraine have been in a state of conflict since 2014.
That's when Russia invaded and wrested control of the Crimean
peninsula from Ukraine. In response, the US enacted a
series of sanctions against Russia. The Biden
administration has warned at this time around that it's
willing to inflict more severe economic consequences given that
economic sanctions are the West's main deterrent here. I
don't think this is something that they're going to mess
around with.
Eight years later, Russia has mobilized troops on Ukraine's
border and once again, the US and European allies are
threatening Russia with economic sanctions if they decide to use
military force against Ukraine. Well, Russia
currently has over 100,000 troops built up on Ukraine's
eastern border,
they want to revise the post cold war settlement they want to
talk about no more NATO expansion. They want to talk
about no more NATO presence in countries like Ukraine military
presence is a structural or institutional nature and looking
at specific types of capabilities.
Economic sanctions remain a powerful weapon in America's
foreign policy arsenal, but can they keep Russia at bay in 2022?
After Russia annexed Crimea from Ukraine in 2014, the US quickly
imposed a series of sanctions, the sanctions affected Russia's
access to financial markets, and also the ability to export
certain items, notably military equipment.
So when you ask whether about sanctions are effective, it's
helpful to clarify that, do they have an effect? Right? Do they
hurt Russia's economy? Do they change aspects of it? Yes. In
that sense, they are effective. Have they changed the Russian
policy? Well, some people will tell you that the imposition of
sanctions and the fear of more sanctions have kept Russia from
going further than it has. Others will tell you that
they've done absolutely nothing.
Russia has so far not been deterred by the sanctions
enacted in response to the Crimea, annexation,
the Russian perspective on us was that in 2014 2015, they were
economically by far the weakest state in this decade. They're
going through a recession, there was a real financial crisis in
2014. They underwent massive currency devaluation, they burn,
quote through quite a bit of reserves during that time
period. Since then, they were able to stabilize the financial
system, they were able to increasingly disconnect currency
valuation from oil and energy prices.
What we've got is a lot of sanctions that have largely been
applied as punishment, and that are very difficult to understand
how they get removed, in part because the US especially but
also Europe, to some extent, have imposed a wide variety of
sanctions on Russia for a wide range of things, such that it
can be a little bit difficult to figure out what's what there are
fewer people
in Ukraine who who see Russia as friendly today than there were
in 2014. And so hopefully that will give President Putin pause
as he's thinking about the long term costs of invading Ukraine.
The SWIFT system stands for Society for Worldwide Interbank
Financial Telecommunication. Swift provides a secure way for
financial institutions to exchange information about
things like money transfers, Swift doesn't actually move
money, but it does function as a middleman to verify information.
Swift operates out of Belgium, that means the US would need the
support of European allies in order to kick Russia out of the
Swift community. President Biden has threatened to cut Russia off
from Swift, if they invade Ukraine,
sending money overseas receiving money overseas, as well as
engaging largely with international marketplace
becomes so much more difficult for Russian institutions. And
all of that then has a trickle down effect on Russian
businesses,
you would have tremendous impact on Russia international
transactions that would introduce a lot of volatility to
the currency. But there's a point course to ask, first of
all, can anyone actually cut Russia off from Swift? Why would
swift do that? The United States does not have the ability to
kick people off Swift, the collateral damage would be very
significant to Swift as an organization,
it's not clear to me that we will engage in kicking Russia
out of the SWIFT system, but but that would have a huge impact on
Russia, there would be some collateral impacts on the United
States and on Europe as well. But that has to give Vladimir
Putin pause because it would certainly deny Russia, the
ability to engage in global transactions,
think about sanctions is their most effective if you don't have
to use them. They're most effective if you can credibly
threaten something that the other guy doesn't want enough
that they don't then do whatever it is you're trying to keep them
from doing.
Russia is actually the second largest number of participants
in Swift. For participating organizations, it would be
financially a very poor decision for swift to make and swift can
only make that decision if decisions are ratified by
Brussels itself, right? So swift design organization controlled
by the United States, we need to just make that clear. I actually
think that a call for us from Swift is deeply unlikely but for
us to happen. Russia has some of its own alternative transaction
systems, you know, the SPFs system and the National payment
card system called Mir but they've instituted so they have
backup options.
Nord Stream two is a gas pipeline that connects Russia to
Germany via the Baltic Sea. The construction process for the
pipeline began in 2013 and has cost $11 billion so far. It
would augment the first Nord Stream pipeline, which has been
in operation since 2011. Nord Stream two is waiting on final
certification from German regulators to begin operation.
Together, the two pipelines could move 110 billion cubic
meters of gas every year, Senator Jeanne Shaheen, a
Democrat from New Hampshire and a senior member of the Committee
on Foreign Relations recently wrote an op ed with Republican
Senator Rob Portman on the importance of standing up to
Russia. One key issue was the gas pipeline Nord Stream to
anything that makes you are more dependent on Russia is I
believe, is not a good idea. It also bypasses the pipeline that
ran through Ukraine in a way that will have an impact on
Ukraine.
The views within the German government appear to be divided
on this, the German foreign minister has made it very clear
that she thinks Nord Stream two should be on the table if the
Russians attack Ukraine.
In total, Russia provided 48% of the EU's natural gas imports in
2020.
The former chancellor of Germany made a deal in the summer with
President Biden when he waived sanctions on Nord Stream two
that Nord Stream two would be on the table and my understanding
is that all of shorts her successor, centered have agreed
to this. Now, some of the language coming from him and
members of his party in senior positions recently has suggested
they might be backtracking on this. I'm not sure how
seriously, I take that. I frankly think that if the
Russians are ill advised enough to actually make a military move
on Ukraine, there is absolutely no way politically, this
pipeline could go into operation. Without a major
political diplomatic damage for the Germans.
Energy clearly is an issue and we need to provide alternatives
so that Europe is not dependent on foreign oil and gas from
Russia.
The Russian goal had always been to impose their will on Ukraine
to secure Ukraine strategic orientation and alike but
without having to actually control the territory or pay for
it where we
are now we've just had a series of talks at the Presidential
Leader level as well as with counterparts between Washington,
NATO and Russia. At the moment, it's still a crisis of the
Kremlin's and making, and it's really up to President Putin to
decide what comes next
Republican Senator Ted Cruz has proposed a bill that would
automatically impose sanctions on North Stream to if Russia
invades Ukraine. In response, Democrats have proposed their
own sanctions bill that would give the administration more
leeway on the Nord Stream issue. Senator Cruz's bill failed to
pass the 60 vote threshold in the Senate, however, it did
manage to get some support from Democratic lawmakers.
There are a lot of not just Democratic senators, but also
Republican senators, who despite their criticism of the pipeline,
which I completely share, it's a bad idea to sanction an ally, to
use tools of economic coercion against allies, which with which
I tend to agree, and that in the current context, it would
undercut the Biden's illustrations extremely careful
efforts to create a united front with its NATO allies. At a time
when the Russians would see this as an invitation
to move. The circumstances are very different than they were
when Russia went into Crimea. And we need to do everything
possible to make clear to Putin that this is going to be a
united response. Should he take this action