WASHINGTON, March 26, 2014 – As Vladimir Putin considers his next move, President Obama and the Western Allies consider what a proper response should be. Their not quite consensus view seems to be the application of economic sanctions. So far a few prominent Russian citizens who have become extremely wealthy through their relationship with Putin, have had their assets frozen and a Russian bank has essentially been pushed out of business. And Russia has been kicked out of the G8, now known as the G7. The question is: will that be enough?
The answer partly depends upon what the President is trying to accomplish. There appears to be no way to get Putin to leave Crimeria, even with economic sanctions. The problem with that type of response is that it can only be effective if virtually all countries support the sanctions and it generally needs time, often years. In this situation, the Putin threat may be more imminent so that any actions where the effects take years to work, will not stop him.
Most times economic sanctions will cause harm to an economy but will not likely force a change in behavior. For many years we tried to use economic actions to change behavior and failed. In Cuba, for instance, we have had a 50 year embargo with the goal of having the government allow free elections which would lead to a democratic society. The country, however, maintains its communistic system.
Also the harm from sanctions is often minimized by other countries who see an opportunity to profit by funneling sales of restricted goods through their markets. Usually these are third world countries or allies who simply do not honor the sanctions.
The President has mostly removed the threat of any more forceful action when he cancelled the Eastern European missile shield, failed to take action in conflicts like Syria and retreated from two wars. Now economic sanctions may be all he has left. Is there a way that they could work?
First off, every major country has to be supportive. That will be difficult considering that much of Europe depends on Russia for energy. The obvious solution to get full support, would be for the US to make up the shortfall. Because of environmental concerns that may be difficult for the President. But I think in this instance our security concerns should take priority over our environmental concerns.
We could allow out abundant natural gas reserves to be liquefied and exported to Europe. Similarly we could build the Keystone pipeline which will increase our ability to export oil to Europe.
If there is no market left for Russian oil and gas, their economy would suffer greatly and could collapse. It could still take some time, which is something that may be in short supply. Tougher sanctions could be used in the banking industry which would cause their currency to dramatically lose value. The worry is wondering what Putin’s response to that would be. If he feels trapped and he believes that the president will not use a military option, his actions are unpredictable.
At this point, economic sanctions may be the president’s only option.