Sanctions in the age of globalisation

There is every cause to be outraged by Russia’s annexation of Crimea, which is a brazen violation of Ukraine’s sovereignty and a clear breach of international law. President Vladimir Putin’s bald-faced adventurism has been attended by a mockery of a referendum held under the shadow of Russian guns and mouthfuls of Orwellian propaganda to justify the intervention. It is asinine to draw a parallel between Kosovo’s secession from Serbia and the Russian intervention to ‘save’ Crimea — in the latter, there was no systematic persecution of Russians, leave alone ethnic cleansing. The reasons for Putin’s aggression — whether strategic, nationalistic or plain imperialistic — matter less than how the world is going to respond to it.

The U.S. and the European Union have retaliated with sanctions, but they are limited, being largely people-specific rather than nation-based. To freeze the assets of some people, many of them Putin’s cronies, and slap travel bans on them is hardly going to worry Moscow. Not surprisingly, these measures have evoked more mirth than concern in Russia. The EU and the U.S. have promised to widen the sanction regime, but it is not clear how far they will risk going. The EU is Russia’s top trading partner; more importantly, it relies on Russia for nearly a third of its gas. Russia imports over $ 160 billion worth of EU goods annually, mainly from Germany, Italy and France. This possibly explains why these countries are more cautious about sanctions than the Baltic States and Poland, which have been victims of past Russian imperial ambitions. Even for the US and UK, the cost of retaliatory action from Russia in the event of tough sanctions may not be small. The likes of BP and Exxon-Mobil have close ties with Russia’s top oil firm Rosneft; the former actually owns 20 per cent in it, while the latter has a joint partnership for offshore exploration in the Russian Arctic and Black Sea regions.

Putin has declared he has no interest in expanding his hold in Ukraine, which may possibly decrease the hold of those in favour of much harsher sanctions. Also, it is hard to see what a tougher sanctions regime would achieve at this juncture. If their objective is to force Russia to vacate Crimea, it is almost impossible that they will achieve this. In an age where interdependence in trade and capital flows between nations is the defining reality, it is a sobering truth that pragmatism has a better chance of success than principle. India’s stance that it won’t back sanctions against Russia, which has been eagerly welcomed by Moscow, is a reflection of this expediency. Just as economic interdependence reduces the risk of war, it also decreases the appetite for real and telling retaliation.

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