President Barack Obama held a conference call, from Seoul, South Korea, with the G-7 Leaders of Germany, France, Italy and the United Kingdom on Friday. Unfortunately. it sounds like “all talk, and no action”. A list of potential sanctions will be released, and which the U. S. might implement as early as Monday; however, each of the other countries will voluntarily select which ones they will act on…and when. (HUH?) Isn’t that like declaring War, but at a time, date and manner to be determined later?
The Russian economy is already a basket case. The Ruble is floundering and has never been a convertible currency. Even worse, $50 Billion (US Dollars) has been transferred out of Russia in the first quarter of this year, and that could reach $200 Billion by Year-End. Dollar-denominated Russian bonds were recently downgraded by S & P to BBB-, just barley above Junk Bond Status, and S & P already has them placed on “Negative Outlook” (for more potential downgrades). They’re already trading like “Junk”.
And, in addition to the outflow of Cash and higher borrowing costs, for both the government and corporations, Energy prices–which represents approximately 70% of Russia’s economy–are down. The Uncertainty, due to the situation in Ukraine, just makes things even worse. So, what external source would even think of investing in Russia now? Russian Fiscal and Monetary Policy are being managed counter to each other. Oh, and the Central Bank is raising interest rates due to an Inflation Rate of 7.0%.
It should be noted, however, that President Vladimir Putin’s approval rating has skyrocketed. Patriotism runs very high in Russia; however, that’s because Putin, at least so far, hasn’t presented the bill for the Sochi Winter Games, let alone for what the cost of Annexing Crimea will be. But, what happens when the Russian People stop living on Emotion and Propaganda, and realize the truly sorry state of their Nation’s Economy?
Now is the time for the American-European Alliance to move in for the kill. But, tougher sanctions need to be initiated immediately and in concert, throughout the US-EU Alliance. Republicans in Congress keep stressing that Obama should do more. Well, guess what GOPers: Americans do not want the U. S. to enter another Military Conflict, and certainly not in Russia’s backyard. Also, if our banks disrupt the flow of US Dollars to Russia and American corporations stop the flow of trade, that would mean absolutely nothing if Europe doesn’t act simultaneously.
German Chancellor Angela Merkel basically calls the shots. Germany is the strongest country within the European Union–both in regard to population and GDP, and it has the most economic strength and diversity, by far. Unfortunately, as it always seems to do, the European Union operates more like a country club, with each of the individual Member Nations focusing on their own agendas, rather than acting as a United Front.
So, as we have seen before, in this game of cat-and-mouse with Russia, the U. S. would accomplish nothing by acting unilaterally. However, we only have a small fraction of the Trade with Russia that Europe does. The German chemical giant, BASF, and the British oil company, BP, are leading the European Industrial Community to suggest more diplomacy, rather than action. And, their prediction that sanctions won’t work merely begs the question: Well, why not try them since the Russian Economy is already down on the mat?
Each of the Member Nations in NATO, which is somewhat different than the E. U., have signed onto a Mutual Defense Pact: an attack against one NATO Nation is considered to be an attack against all of them. Ukraine hasn’t joined; but, some of the other former Soviet Satellites are already Members. That really irks Vladimir Putin.
Since the Collapse of the Soviet Union, in 1991, the West has been regarding Russia as a civilized adversary. Someone to bargain with and to jointly take disagreements to the United Nations. But Russia currently seems to be neither East nor West. At the beginning of Moscow’s invasion of Crimea, Angela Merkel said that Putin is delusional.
Gary Kasparov, the famous Russian Chess Grandmaster and political Dissident, made a very cogent observation of Vladimir Putin. He said that Putin makes a better Poker Player than a Chess Player; because, in Chess, you have to play by the rules.
Many still doubt that Moscow wants to start a War, or even to instigate a Ukrainian civil war. If so, Putin couldn’t deny his responsibility. He might still be jockeying for concessions, such as: recognition of Crimea’s annexation; removal of all sanctions against Russia and complete autonomy for Eastern and Southern Ukraine. Or, might that be just enough for now–until The Bear returns in the future? Angela, it’s your move!