The West needs to be cautious of a sanction war
Russian troops secured their position in a disputed part of southeastern Ukraine last week, pushing forward while millions watched news packages of large tanks and convoys cutting through foggy wheatfields. The Donetsk People’s Republic and the Luhansk People’s Republic, breakaway states forming what we know as the Donbas, a Ukrainian portmanteau for “Donbas Coal Basin,” or “Donetskyi vuhilnyi basein,” will soon be de facto annexed into the Russian Federation while the West is reeling, mounting political and economic pressure on Russia to refrain from any further military action in Ukraine.
The Russian Duma, or lower house of parliament, voted to “recognize the independence” of Donetsk and Luhansk on Tuesday, Feb. 22, a measure that was approved unanimously with applause. President Volodymyr Zelenskyy has urged his citizens to leave Russia immediately, and the Ukrainian legislature voted to sustain a 30-day state of emergency. In past statements, the government has maintained a strong stance in favor of diplomatic action.
Conflict in the Donbas region has persisted since the early 2010s, when the Minsk Protocol established a final ceasefire during the initial fighting in Donetsk and Luhansk before current intervention. The Organization for Security and Cooperation in Europe had stepped in and established the Minsk II protocol in cooperation with French and German authorities in 2015.
Since then, the balancing act of maintaining Zelenskyy’s government and NATO’s slow encroachment into the Russian theater of influence has melted into the status quo. Now, the taboo is revealed, and the Russians have responded. Throughout the last 10 years, the United States has been engaging in military activity all over the Eastern Europe – just last month NATO’s militaristic flirtations with Georgia and Ukraine were stirring tension. Albeit less severe than an invasion, NATO was not supposed to grow post-collapse of the Berlin Wall – and coupled with large-scale military exercises in Estonia, Latvia, Lithuania, Poland, Romania and Bulgaria – It is neglectful to overlook this fact and U.S. presence in the Eastern Bloc not as a peacekeeping force, but a perpetuator of proxy war, and with 26% of Americans saying that the U.S. should “play a major role” in the conflict, according to AP NORC.
The United States retaliated last week with an array of economic sanctions against institutions and individual Russian citizens, effectively barring integral banks and state-owned institutions from U.S. markets, looking to the country’s private financial sector as the next target for potential sanctions, according to a White House press release from Tuesday, Feb. 22. Two Kremlin and military-linked institutions, Vnesheconombank and Promsvyazbank, have also been sanctioned. Nord Stream AG, the corporation spearheading a huge cross-Europe pipeline project carrying gas from Russia to Germany, has announced that it will halt construction after being banned from operating in the U.S.
The European Union has announced economic sanctions on Russian members of parliament who supported the independence referendum in Donetsk and Luhansk, which operated as a political green-light for Putin’s military agenda, along with swift action against banks and institutions that cooperate with the financial apparatus of the Russian state and military.
The United Kingdom and European Union banned Russian aircraft and airline giant Aeroflot from landing flights in the British Isles and mainland Europe. Sanctions against financial institutions and high-priority individuals – not unlike those from her American teammate – shall further inhibit the movement of Russian money and people.
Prime Minister Boris Johnson slammed Putin in public comments, saying that he believes in “imperial conquest,” and going insofar to say that allied powers were prepared to exclude Russia from international trade with the United States dollar currency through action in the Society for Worldwide Interbank Financial Telecommunication, a security network across the globe that is used by large financial institutions to send and receive data and transactions. As of Tuesday, March 1, the Russian sovereign wealth fund, government and other state-affiliated entities cannot conduct international banking transactions in euros or USD. The ruble is in a downward spiral.
Putin has said there will be a response to sanctions, although it will not be “symmetrical.” The Russian response to Western outcry is on par with the typical exchange – Putin has declared that, regardless of sanctions, Russia will pursue its defense interests. Reports from American and European newspapers harp the imminent invasion and destruction of Ukraine, the strength and moral vacuum of Putin and the U.S. and its allies battering Russia with a new regime of strict sanctions.
In the United States, we remain comfortable in our homes, reading about tanks on backroads and “saboteurs” in Kyiv – seemingly faraway and unreachable places.
Ukraine is a large grain exporter, and the Russian invasion caused the U.S. wheat futures to skyrocket to a new decade-high. Russia is a world-class producer of natural gas and oil, and supply-side anxiety caused a barrel of West Texas Intermediate to climb to $91. Some experts are telling CNBC that oil could reach up to $131 as a result of regional conflict. In July 2008, crude oil had reached $147.
The U.S. should learn from our history and experience as the third-party in overseas conflicts. In lieu of a strategy that could repeat the disastrous material consequences of Iran, Syria and Cuba, America could offer asylum to thousands of migrants heading west to Poland and the E.U., coupled with assistance to governments housing them, before the situation devolves further. The U.S. could offer diplomatic assurance that sanctions will not punish the Russian people, who have protested the invasion in the streets of its large cities. Sadly, I am not sure that this quid pro quo between the treasury and Russia’s doomed and barred central bank will do more than cripple the Russian economy, crashing the ruble and exposing Ukraine to our offensive moves.
