If one listens to the endless rhetoric of hollow threats and escalating war of words between Russia and DC, one thing should be clear by now: with the passage of the Crimean referendum, accepted (not to mention planned) as perfectly normal by Moscow and blasted as illegal by the West (since it is the former whose troops are in the Crimea, not the latter) then Putin has certainly crossed the Rubicon this time especially since as it was reported earlier, Crimea will formally apply to join Russia tomorrow. Surely, if nothing else, than at least the, drumroll, sanctions must be coming – after all if there is no forceful response now when Putin has called the Western bluff, the West may as well not bother. Well they very well may be… in about a week. The reason: Congress is now in vacation until March 24, so there will be at least one week before any response to the formal Russian annexation can be debated, let alone enacted into law.
But once Congress is back from recess it certainly will unleash very harsh and truly “costly” sanction fury and what not. For real this time.
From the WSJ:
The U.S. and European Union must move quickly to exert economic pressure on Russian President Vladmir Putin for his attempt to seize a part of Ukraine, senators who recently returned from the embattled nation said Sunday.
The Senate’s first order of business when lawmakers return to Washington on March 24 will be legislation to impose sanctions against Russia and provide aid to Ukraine, said Sen. John Hoeven (R., N.D.), who was part of a bipartisan group of eight senators to visit Ukraine. “I believe that Congress will pass that bill,” he said.
The strategy in a nutshell: “We need to move forward and put these things in place,” then wait to see how Russia reacts, Mr. Hoeven said in an interview Sunday. “They can be effective against the Russian ruling class. If we do that in a concerted way with our allies, we can make this painful to Russia.”“
The same ruling class that only cares if commodities go up, and is even happier if the oligarchs that are the traditional foil to the Kremlin face margin class, that one? Because for a second there we though it was Russia that had the upper hand when it steamrolled through every single instance of verbal diarrhea and game of checkers the west could throw at Russia’s chess grandmasters.
Meanwhile, the ongoing appeasement – in all but name – continues:
If Russia deescalates the situation, the actions proposed by the U.S. and its allies could be adjusted accordingly, Mr. Hoeven said.
Sen. Chris Murphy (D., Conn.) said Mr. Putin may have miscalculated how the U.S. and Europe will respond to his actions. “I think he marched into Crimea because he didn’t believe that the United States and Europe would actually take a chunk of flesh out of his economy,” Mr. Murphy said on ABC’s “This Week.”
Or, perhaps, Mr. Putin calculated perfectly to the third decimal place, that should the military conflict in Ukraine escalate to all out war, while it will crush the Micex which already is in a bear market (and yet people in Russia continue to survive even if the wealth effect has been cut by over 20%), the next stock market to take it in the face will be none other than the S&P500 – the same manipulated, artificial indicator of US economic “stability” sustained by the Fed’s balance sheet at a time when every other hard data-based metric is screaming recession. Maybe the impact on the US’ economy should Russia push on will be far more tangible than anything that could happen to Russia, the bulk of whose trade is with China anyway, and whose commodity exports keep Europe’s precarious economy from tumbling into a re-depressionary abyss. And let’s not mention what happens to Russia’s current account (and Gazprom’s bottom line) if the price of crude or nat gas explodes as a result of a Ukraine war.
What about simply freezing Russian assets in the west? “Mr. Hoeven and other lawmakers said the U.S. and Europe would be watching Mr. Putin’s next move closely following Sunday’s referendum, designed to set the stage for Russia’s annexation of the Crimea region…. The proposed sanctions include diplomatic and economic penalties, such as travel restrictions targeting Russian and Ukrainian officials viewed as overseeing or complicit in the Kremlin’s efforts to annex Crimea.”
Sure that would work… if Russian oligarchs had not already pulled material amounts of their western-bank parked holdings out as was reported on Friday, just as they did before the Cypriot deposit confiscation, whose one year anniversary incidentally was today. Quite an amusing way for Russia to celebrate said “blueprint” anniversary one would say.
Finally, in lieu of actually doing something, the western experts are proposing sliding scales and staggered sanctions:
Steven Pifer, a former U.S. ambassador to Ukraine, said the level of sanctions will depend on Russia. “The bigger question is, where does Russia go and does Putin do?” said Mr. Pifer, now with the Brookings Institution think tank.
Sanctions would be imposed on a sliding scale of severity depending on Russia’s response, he said. Already, the threat has led economic forecasters at Goldman Sachs to downgrade their expectations for Russia’s economic growth this year to 1% from 3%.
Mr. Pifer sees three possible roads ahead: One is to recognize Crimea as an independent state, which is unlikely. The second is for Russia to formally make the Crimea region part of Russia. The third step is to take no action, leaving Crimea “in limbo” and using it as a negotiation tool to turn Ukraine away from joining the E.U. with the promise that Crimea’s status can be adjusted in a way that’s favorable to Ukraine.
Eugene Rumer, director of Russia and Eurasia program at the Carnegie Endowment for International Peace, said even sanctions come with complications.
Like being unable to buy the S&P at the all time highs? Or maybe the “costs” Obama has been speaking about for so long had precisely the “BTFATH mentality” in mind?