Tuesday, 8 April 2014

Sanctions on Russia may backfire

Sanctions seem to have replaced actual warfare as the preferred weapon these days. But are sanctions imposed on Russia in the wake of the annexation of Crimea going to have the intended effect? More than in other cases of (usually futile) sanctions the latest version of sanctions will have little effect - or even backfire on the sponsors in the 'West'. A look at the map makes it clear that Russia is not just any country that can be bossed around 'gunship style'. It is a whole continent! So self-sufficiency should not be a problem. And looking at economic history a period of isolation from the world markets, esp the main economies, should actually do wonders for the development of a competitive domestic industry. Do Russians - the broad mass of people, not the oligarchs - really need to buy BMW's or other high-end luxuries from the West? The USA and Germany have expanded their domestic industries behind tariff walls, and the English navigation act has contributed substantially to the rise of British sea power. Cutting off access to international financial markets will not lead to the default by Russian borrowers as predicted in some places. Russia can simply declare 'Force majeure' and refuse to pay back the loans if they are not rolled over at the behest of unaccountable political lobbies. The USA have only minor trade relationships with Russia, but therefore Russia is not much exposed to any lost trade with that country either. And the EU may be a substantial partner, but the world is large enough, there is China, India, Brazil etc. And if Russia really gets needled too much it can make overtures to Iran and other states therefore setting the cat among the pigeons.